JP Morgan Chase has agreed a record $13-billion (9.6-billion-euro) settlement over misleading mortgage practices which authorities said stoked the 2008 financial crisis. The US bank may still face criminal charges.
The US bank agreed to the largest regulatory settlement in US history with federal and state authorities on Tuesday over mislabeled mortgage securities that collapsed in value during the US housing crisis, the Department of Justice said.
The largest US bank "acknowledged it made serious misrepresentations to the public - including the investing public" over the quality of residential mortgage-backed securities (RMBS) it sold ahead of the financial crisis, the department said in a statement.
The long-awaited deal requires JPMorgan to pay $9 billion in payments to authorities and provide $4 billion in relief to consumers - mainly homeowners - harmed by the conduct of the bank and two failing firms it acquired during the crisis, Bear Stearns and Washington Mutual.
"Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown," Attorney General Eric Holder said in a statement.
"JPMorgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm's behavior."
"The size and scope of this resolution should send a clear signal that the Justice Department's financial fraud investigations are far from over," Holder added. "No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability."
Criminal charges still possible
The settlement resolves most of the federal and civil claims over the mortgage securities that investors incurred huge losses on. According to the Justice Department, however, the bank or individual employees could still face criminal charges.
The deal was the latest in a series of government actions over mortgage securities, which authorities say stoked the financial sector meltdown that, alongside the collapse of the housing sector, plunged the economy into recession in 2008.
This is a "historic deal which will bring long-overdue relief to homeowners around the country and across New York," said New York Attorney General Eric Schneiderman, who co-led a task force investigating JPMorgan and other banks over losses the federal government and states incurred on mortgage securities.
"We refused to allow systemic frauds that harmed so many New York homeowners and investors to simply be forgotten," he said.
"And as a result we've won a major victory today in the fight to hold those who caused the financial crisis accountable."
ccp/av (AFP, AP, dpa)