Record Settlement on Table, But J.P. Morgan Faces Fight
J.P. Morgan Chase & Co. reached a tentative deal this weekend to pay $13 billion to end a number of civil investigations into its sale of mortgage securities before the 2008 financial crisis, but a separate and potentially more serious criminal probe into the bank and its executives will continue.</br></br>The Justice Department, convinced it has strong evidence related to the bank's conduct and eager to send a message to Wall Street, rebuffed repeated attempts by J.P. Morgan to settle the criminal investigation without admitting wrongdoing and agreed only to resolve the civil investigations. It also threatened last Thursday to file its civil case this coming Wednesday if the two sides can't reach a final deal, said people close to the talks.</br></br>The proposed pact includes $4 billion to settle claims by the Federal Housing Finance Agency that J.P. Morgan misled Fannie Mae and Freddie Mac about the quality of the mortgage securities it sold them, another $4 billion in consumer relief, and $5 billion in penalties paid by the bank, according to people familiar with the deal. But the two sides remain apart on several issues related to the civil settlement, including whether the bank should have to admit that it didn't follow its own due-diligence standards in packaging the mortgages into securities it could sell, according to people familiar with the discussions.</br></br>The talks come as the bank faces an uphill battle in Washington. Once a favorite in the capital, J.P. Morgan now is grappling with a bruised reputation and fractured relationship with regulators in the wake of the "London whale" trading fiasco out of the bank's U.K. headquarters. The trades, which lost the bank $6.5 billion, transformed J.P. Morgan from an institution that seemingly could do no wrong to one under heavy and unyielding scrutiny.</br></br>When top bankers assembled at the White House in early October, J.P. Morgan's James Dimon found his name card on a seat in the corner, far from his usual perch across from President Barack Obama. Mr. Dimon, who in previous gatherings had been quick to share his opinions with the president, was reserved and said little during the meeting, according to people who attended. Other chief executives saw his placement as a symbolic shift.