JPMorgan Says It Broke No Law. So Why Pay The $13 Billion?
State and federal regulators have hailed Tuesday's $13 billion settlement with JPMorgan Chase & Co. over faulty mortgage assets it sold in the years leading up to the financial crisis as a big victory for the judicial system.
But like other big settlements to emerge from the financial crisis, the deal leaves unclear just what the bank did wrong.
The government alleged that the bank and two other financial institutions it later acquired were repeatedly warned about the quality of the mortgage assets that were sold — but never did anything about it.
"The conduct JPMorgan has acknowledged, which is packaging risky home loans into securities, then selling them without disclosing their low quality to investors, that is behavior that we believe contributed to the wreckage of the financial crisis," Tony West, associate U.S. attorney general, said this week.
The government spelled out its case in a statement of facts that JPMorgan agreed to sign. But even as the bank was acknowledging its conduct, it was also proclaiming its innocence.
"The firm has not admitted to any violations of the law," Marianne Lake, JPMorgan's chief financial officer, said in a conference call Tuesday.
Lake and CEO Jamie Dimon repeated that several times: No violations of the law. At the same time, the bank signed an agreement that U.S. officials say suggests a pattern of misleading investors.
So who's right?
"We're in an age of spin, and I think the answer is, everybody is right," says securities lawyer Jacob Frenkel. He says the statement of facts at the heart of the case is artfully worded so that both sides can walk away claiming a victory of sorts.
JPMorgan Chase, for instance, gets to settle the case and move on. But it doesn't admit anything that might come back to haunt it later on — like in one of the private lawsuits it faces, for example.
The Two-Way
JPMorgan Chase Will Pay $13 Billion In Record Settlement