JPMorgan discloses wider probes of hiring, currency trading

REUTERS - JPMorgan Chase & Co , the biggest U.S. bank by assets, disclosed on Friday that the U.S. Department of Justice and agencies from other jurisdictions are investigating hiring practices in Hong Kong that were already being probed by the U.S. Securities and Exchange Commission.

The company also said that it is being questioned about its currency trading by various authorities, which are in the early stages of their investigations.

Other big banks have made similar disclosures recently about probes of possible manipulation of foreign exchange rates.

JPMorgan also gave more details about U.S. government investigations into the bank's relationship with convicted Ponzi schemer Bernie Madoff. Two government offices, the U.S. Attorney's Office for the Southern District of New York and the Office of the Comptroller of the Currency, are currently looking into the ties between Madoff and the bank.

The U.S. Attorney's Office for the Southern District of New York is also investigating the bank's activities in the California and Midwest power markets that were the subject of a $410 million settlement between JPMorgan and the Federal Energy Regulatory Commission.

Additionally, the bank offered more specifics on the amount of claims that investors and bond insurers had over mortgage-backed securities. Total claims added up to approximately $117 billion, $88 billion of which involves Bear Stearns, Washington Mutual, JPMorgan or its affiliates as an issuer and $29 billion of which involves the entities solely as underwriters.

The company made the statements in a quarterly filing with the U.S. Securities and Exchange Commission.

(Reporting by David Henry and Peter Rudegeair in New York; Editing by Phil Berlowitz)

View the original article here

JPMorgan in $5.1 billion deal with housing agency

By Aruna Viswanatha and David Henry

REUTERS - JPMorgan Chase & Co has agreed to pay $5.1 billion to settle claims that it and firms it bought misled Fannie Mae and Freddie Mac about the quality of mortgage securities and home loans it sold to them during the housing boom.

The bank and the agencies' regulator said Friday evening that the settlement was expected to be part of a tentative $13 billion deal that JPMorgan is negotiating with federal and state agencies over its mortgage bond liabilities.

But the unusually timed announcement, which appeared to catch other parties involved in the negotiations by surprise, covered not only $4 billion that was expected as part of the larger deal but also an additional $1.15 billion to cover separate issues over home loans.

The $4 billion portion of the payment, which was agreed on several weeks ago according to people familiar with the negotiations, resolves a 2-year-old lawsuit in which the regulator accused JPMorgan of overstating the quality of loans in mortgage securities in sold to Fannie and Freddie.

The agency became impatient waiting for the larger settlement and wanted to move on to resolving similar lawsuits it brought against other banks, one person said.

The additional $1.1 million resolves claims that JPMorgan breached the representations it made about the quality of single-family mortgages it sold the government-sponsored entities, the regulator said.

Negotiations on the final terms of the larger settlement are continuing, people familiar with discussions said on Friday.

While the parties have agreed to the framework of the deal, talks have slowed over whether JPMorgan can shift onto the Federal Deposit Insurance Corp liabilities of Washington Mutual, a failed lender which JPMorgan took over during the financial crisis.

The FHFA settlement leaves open the possibility for JPMorgan to recoup payments related to Washington Mutual. The Justice Department, which is leading the larger negotiations, is seeking a provision in the larger settlement that bars JPMorgan from seeking to push the claims onto FDIC, according to one of the people familiar with the talks.

It is unclear if the FDIC will be part of the larger settlement. FDIC spokesman Andrew Gray declined to comment.

The $13 billion settlement is also expected to include a $2 billion enforcement penalty for JPMorgan's mortgage securities sales which are being investigated by federal prosecutors in California; $4 billion of consumer debt relief; and $3 billion of assorted payments and compensation sought by other government agencies.

"This is a significant step as the government and J.P. Morgan Chase move to address outstanding mortgage-related issues," FHFA Acting Director Edward DeMarco said in a statement.

The bank, the largest in the United States, said the deal was "an important step towards a broader resolution" of the firms mortgage-related issues with government agencies. (Reporting by David Henry in New York and Aruna Viswanatha in Washington; Editing by Richard Chang)

View the original article here

JPMorgan in $4 billion deal with U.S. housing agency

By Aruna Viswanatha and David Henry

WASHINGTON/NEW YORK (Reuters) - JPMorgan Chase & Co has reached a tentative $4 billion deal with the U.S. Federal Housing Finance Agency to settle claims that the bank misled government-sponsored mortgage agencies about the quality of mortgages it sold them during the housing boom, according to a person familiar with the matter.

JPMorgan and the FHFA, which is pursuing claims on behalf of finance agencies Fannie Mae and Freddie Mac, have agreed on the amount as a tentative part of a potential $11 billion global settlement with government agencies, including the U.S. Department of Justice.

The $4 billion figure was first reported on Friday by the Wall Street Journal.

A spokesman for JPMorgan declined to comment as did a spokeswoman for the FHFA.

The bank and the Department of Justice have discussed a broader deal under which JPMorgan would pay $7 billion of cash and $4 billion of consumer relief, to cover claims from the FHFA and other government agencies.

JPMorgan is seeking a single settlement to resolve all claims from federal and state agencies over its mortgage-related liabilities stemming from the bust in house prices.

Baring a complete breakdown in talks with the Department of Justice, a final deal between the bank and the FHFA is unlikely to happen outside of a broader pact, a person familiar with the matter told Reuters on Friday.

Earlier this week, others familiar with the talks said negotiations continued between the Justice Department and JPMorgan, with the bank circulating several proposals.

The FHFA has sued JPMorgan over mortgage loans totaling some $33 billion. A $4 billion deal would amount to about 12 cents on the dollar, less than the 20-cent rate under an earlier settlement by Switzerland-based bank UBS AG , said Josh Rosner, managing director of Graham Fisher & Co, a New York research consultancy.

At first glance, the tentative settlement looks like "a great deal for JPMorgan," Rosner said. He cautioned that it is unclear how comparable the deals are because the loans at issue have different origins and differences between the balances owed are not known.

CEO Jamie Dimon went to Washington to meet with U.S. Attorney General Eric Holder on September 26 to advance those discussions, but a deal has not been forthcoming.

Though Dimon is intent on getting the legal issues behind the bank, a sore spot with him and other JPMorgan directors has been how much the company will have to pay for bad mortgage deals done by Washington Mutual and Bear Stearns, two troubled institutions that JPMorgan took over during the financial crisis with the encouragement from bank regulators.

JPMorgan reported its first quarterly loss under Dimon on Friday as the company recorded a $7.2 billion hit from litigation expenses largely to build its reserves to settle lawsuits over mortgages. The bank said all of its legal reserves now amount to $23 billion.

(Reporting by David Henry and Karen Freifeld in New York and Aruna Viswanatha in Washington; Editing by Gary Hill and Leslie Gevirtz)

View the original article here

JPMorgan in tentative $13 bln deal with U.S. Justice Dept - source

By Aruna Viswanatha and David Henry

WASHINGTON/NEW YORK (Reuters) - JPMorgan Chase & Co has reached a tentative $13 billion deal with the U.S. Justice Department and other government agencies to settle investigations into bad mortgage loans the bank sold to investors before the financial crisis, a source familiar with the talks said on Saturday.

The tentative deal, the largest ever between the U.S. government and a single company, does not release the bank from criminal liability for some of the mortgages it packaged into bonds and sold to investors.

That had been a major sticking point in the discussions, but the government refused to budge on that issue and JPMorgan felt it had no choice but to give in, according to a second source. Until recently, the most that JPMorgan was willing to pay was closer to $11 billion.

The ongoing criminal investigation underscores how even if this settlement takes some heat off JPMorgan Chief Executive Jamie Dimon, he still has myriad regulatory issues to deal with.

The biggest U.S. bank sidestepped the worst of the financial crisis but now faces more than a dozen probes globally into everything from alleged bribery in China to a possible role in manipulating benchmark interest rates known as Libor.

While JPMorgan investors have publicly supported Dimon, privately many have expressed frustration at his run-ins with regulators. A Senate subcommittee report in March detailed how Dimon demanded that subordinates withhold data from one of the bank's regulators, the Office of the Comptroller of the Currency. Earlier this month, the bank said that Dimon was no longer chairman of JPMorgan's main U.S. retail banking subsidiary, which press reports said happened at the request of the OCC.

JPMorgan's board of directors has pressured Dimon to improve his relationship with government regulators and enforcement officials.

The preliminary $13 billion settlement was reached after he spoke by phone on Friday night with U.S. Attorney General Eric Holder to finalize the broad outlines of the deal, the first source said. Dimon went to Washington to meet with Holder on September 25, and discussed an $11 billion deal at that point.

"They are trying to do whatever they can to get this behind them," said Walter Todd, chief investment officer at Greenwood Capital Associates, which owns JPMorgan shares.

At issue in the settlement is whether the bank sold mortgages that it knew were riskier than they appeared. Investors, including government-owned mortgage agencies Fannie Mae and Freddie Mac, said that the bank told them loans were better than they actually were, or that the bank was negligent in accepting information from borrowers about their income and other matters at face value instead of verifying it.

Some 80 percent of the securities in the $13 billion settlement relate to investment bank Bear Stearns and mortgage lender Washington Mutual, which the government encouraged JPMorgan to buy after they essentially failed during the crisis.

'VERY PAINFUL'

The banks bolstered JPMorgan's bond trading and consumer banking businesses, and helped propel JPMorgan to record quarterly profits. But the legal costs connected with Bear Stearns and Washington Mutual have weighed on JPMorgan.

In the third quarter, the bank lost $380 million, its first quarterly loss since 2004, after it recorded a $7.2 billion after-tax charge for legal expenses. On a call with analysts, Dimon acknowledged that the losses from Bear Stearns and Washington Mutual were "very painful to the company."

Even so, the bank can easily afford this deal. It said earlier this month that it has set aside a total of $23 billion to cover legal settlements. In a typical quarter, it earns about $5 billion to $6 billion, and it has some $30 billion of cash on its books.

The Justice Department is leading the conversations between a host of government agencies and JPMorgan, the largest U.S. bank. As part of the deal, the bank will continue to cooperate in criminal inquiries into people involved in the conduct at issue, said the first source, and JPMorgan itself could still face criminal charges.

The settlement includes a $4 billion tentative deal with the Federal Housing Finance Agency that sources told Reuters about earlier this week.

A third source close to the matter characterized a broader $13 billion deal as likely, but cautioned that parts of the agreement are still being hammered out, and the settlement could conceivably fall apart. The bank's general counsel Stephen Cutler and Associate Attorney General Tony West are negotiating a statement of facts that will be part of a final agreement, the first source said.

Settlement talks started in September, as the Justice Department prepared to sue JPMorgan in California over mortgage securities that the bank sold in the runup to the financial crisis.

The bank and the Justice Department began discussing a broad deal that would resolve not only the inquiry into mortgage bonds it sold to investors between 2005 to 2007 that were backed by subprime and other risky residential mortgages, but also similar lawsuits from the FHFA, the National Credit Union Administration, the state of New York and others.

The broader settlement is a product of a government working group created nearly two years ago to investigate misconduct in the residential mortgage-backed securities market that contributed to the financial crisis. Officials from the Justice Department, the new York Attorney General and others help to lead the group.

(Additional reporting by Susan Cornwell in Washington and Karen Freifeld in New York; Editing by Dan Wilchins, Gunna Dickson and Eric Walsh)

View the original article here