Institute Of International Finance Annual Membership Meeting
Pete Marovich/Bloomberg via Getty ImagesJPMorgan CEO Jamie Dimon
By Aruna Viswanatha
and David Henry

JPMorgan Chase and the U.S. Justice Department have hit snags in working out the final details of their $13 billion settlement over the bank's mortgage bonds, two people familiar with the talks said.

The bank and the government are arguing over whether JPMorgan (JPM) should be forced to pay for mistakes made by Washington Mutual, the failed mortgage lender it bought during the financial crisis.

JPMorgan is also looking to shut down some criminal inquiries into the bank's mortgage business before the financial crisis, said one of the sources. The other source said there appeared to be a misunderstanding over whether that's what the bank wanted.

Both sources added that whatever disagreements the government and the bank may have, the talks are continuing and have not broken down.

The squabbling shows how hard it will be for JPMorgan to end the many legal problems it faces now.

Earlier this month, JPMorgan and the government entered a preliminary $13 billion settlement to end investigations into whether the bank misled investors when it bundled subprime mortgages into bonds before the financial crisis.

Even if the $13 billion deal is finalized, JPMorgan faces other government probes into everything from bad derivative bets to whether it gave jobs to the children of government-owned company officials in China to secure business there.

The largest U.S. bank said earlier this month it has set aside $23 billion over time to pay for legal issues.
CEO Jamie Dimon is eager to put the bank's legal issues behind it so he can focus more attention on running the company. He met with U.S. Attorney General Eric Holder in late September in Washington to reach the tentative package deal.

The Department of Justice is leading multiple federal and state agencies that are probing the mortgage bond business of JPMorgan and two firms it acquired during the financial crisis.

On Friday, one of the agencies investigating the bank, the Federal Housing Finance Agency, grew impatient with the negotiations for the broader settlement, and separately signed a $5.1 billion settlement with JPMorgan.

Some $4 billion of that had been seen as counting toward the $13 billion amount.

Holder and Dimon are both overseas this week. Holder is in Morocco attending a conference and meeting with local counterparts. Dimon is traveling in Europe this week, according to a person familiar with his itinerary.


JPMorgan has been fighting with the government over the Washington Mutual issue for years.

Washington Mutual failed in September 2008, and the government encouraged JPMorgan to buy the bank, which it had been looking at for some time. Under the deal they negotiated, JPMorgan paid $1.9 billion for most of the mortgage lender's assets, and some of its liabilities, leaving behind a receivership at the Federal Deposit Insurance Corp. to pay creditors.

JPMorgan claims that the legal liabilities from Washington Mutual's mortgage bonds go to the FDIC. The government believes the legal liabilities belong to JPMorgan. Reuters reported exclusively on Sept. 30 that the dispute threatened the preliminary deal.

One analyst thinks JPMorgan is fighting a losing battle on this matter.

"I do not believe the FDIC would accept liability related to WaMu," said Joshua Rosner, managing director of Graham Fisher & Co., a research firm.

Also at issue is whether JPMorgan could face further criminal investigations.

In a draft settlement circulated late on Sunday, JPMorgan sought to shut down any criminal inquiries into the bank's packaging and sale of mortgage securities, apart from a California probe the bank has disclosed, the first source said.

The bank had previously agreed to keep all criminal probes out of the settlement, the person added. A second person familiar with the talks said there appeared to be a misunderstanding over the issue.

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The FDIC should be responsible for WaMu liabilities? What's the big deal? TARP covered the liabilities and JP Morgan - even if responsible - would pay merely $.23 on the dollar - WaMu I'm not sure - but certainly not the whole bundle. NOW the FEDERAL (US Taxpayers) Deposit Insurance Company might have to foot the bill and not get remunerated through the TARP provisions? This "Short Term" Economic Debacle just keeps on truckin'. Has ANYONE gotten RELIEF other than the Banks and Investment Houses allowed to COMMINGLE in the "ought" years other than they? "Agents in Europe were too "flexible" in their standards." - JP Morgan 10/23/13. If fired - those "flexible" agents work now for Credit Suisse or Duetsches Bank now - but they've assuredly been suitably punished! I'm sure. No new Mercedes this year! Oh, the horror!

October 30 2013 at 10:52 PM Report abuse rate up rate down Reply

God does not like ugly. For all the people that JPMorgan has let go over the years and took the people houses and put them out on the street. The Bible says "The eyes of the Lord look too and fro the earth observing the good as well as the evil and this bank has cost a lot of grief to a lot of people.

October 30 2013 at 8:50 PM Report abuse rate up rate down Reply

Chase bought WaMu represented by lawyers and they knew or should have known what they were buying, at bargain basement bankruptcy fire sale prices and they get liabilities along with the deal just like any other business aquisition woul have. They also should not get over 9 billion dollars in tax write off of our tax payer dollars. They should take their lumps, make those damaged parties whole, as best as reasonably can be done and move on. Go America!

October 30 2013 at 2:22 PM Report abuse +1 rate up rate down Reply

Imagine how many jobs would be created if they monster banks were broken up everywhere. They were created to fire thousands of workers.

October 30 2013 at 11:41 AM Report abuse +1 rate up rate down Reply