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September 30, 2013 10:10 pm
Negotiations between JPMorgan Chase and US officials to resolve allegations the bank mis-sold mortgage securities in the run-up to the financial crisis are focusing on how credit and blame will be distributed in any settlement, people familiar with the matter say.
As talks enter their second week, lawyers for the bank and the government are continuing to work on the details of a deal, which could see JPMorgan pay about $11bn in penalties and consumer relief.
JPMorgan is seeking to avoid breaking down the claims by the entity that securitised them. The US government’s allegations involve JPMorgan, and two entities it acquired during the financial crisis, Bear Stearns and Washington Mutual, these people say.
The bank, which has implied most of the faulty securitisations were done by Bear Stearns and WaMu before they were acquired, would prefer to not break down the claims to avoid shining a spotlight on JPMorgan, these people say.
There is also an impression that the government agencies – the Department of Justice, Federal Housing Finance Agency and New York state attorney-general – are considering how to best allocate credit without having any agency appear weak. It is not clear how strong a factor that is, since settlements usually specify how much each government entity will receive.
It is possible a settlement might not be reached if both sides cannot reach an agreement on admissions of wrongdoing by JPMorgan, these people say. The DoJ is pressing for admissions as part of any settlement, while the bank wants to limit the admissions to avoid consequences in private litigation.
The threat of criminal charges still looms over the negotiations, these people say. The DoJ is pursuing a criminal component to the settlement, which could derail negotiations as the bank believes it is paying one of the largest financial settlement to buy peace. Talks began in earnest last Tuesday as the bank sought to delay a threatened action by the US attorney for the Eastern District of California. Jamie Dimon, chief executive, went to Washington on Thursday to meet Eric Holder, the US attorney-general.
Separately, Mr Dimon is returning to Washington for a scheduled meeting, with other bank executives, with President Barack Obama on Wednesday.
An industry participant said concern over the debt ceiling battle would be raised. A White House official said: “The president will meet members of the Financial Services Forum at the White House while they are in town for their annual meeting.”
Lloyd Blankfein, chief executive of Goldman Sachs, is also expected to attend. Other members of the forum who will be present include Brian Moynihan of Bank of America and Anshu Jain of Deutsche Bank.
After initially indicating he would not attend, AIG said Robert Benmosche, its chief executive, would also join the gathering. He was criticised last week by politicians and regulators for comparing the furore over bonuses at AIG with racist lynchings. Mr Obama was a leading critic of the bonuses in 2009. Mr Benmosche later apologised.
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