JPMorgan Chase & Co.’s record $13 billion deal to end probes into mortgage-bond sales may save the bank billions more because of what the agreement lacked: An explicit admission of wrongdoing.
Employees of JPMorgan and two firms it acquired knew some of the loans included in bonds didn’t meet underwriting standards, a fact not shared with buyers of those securities, the U.S. Justice Department said yesterday in a statement. That doesn’t mean the company misled investors, said Chief Financial Officer Marianne Lake, disputing how some state and federal officials characterized the deal.
JPMorgan, the biggest U.S. bank, sought to end one of the largest legal uncertainties it faced without providing fodder to private litigants. The firm is still the subject of Justice Department probes into its energy-trading business, recruiting practices in Asia and its relationship with Ponzi scheme operator Bernard Madoff.
“They’ve left themselves some wiggle room to say, ‘No we didn’t violate the law’,” said Peter Henning, a former federal prosecutor and Securities and Exchange Commission attorney who teaches law at Wayne State University in Detroit. “There is at least some acknowledgment that there were improprieties, but exactly what they were remains open, and certainly they can deny it in any specific case.”
Even as the Justice Department touted the accord as “the largest settlement with a single entity in American history,” JPMorgan’s shares rose 0.7% to $56.15 yesterday and added 18 cents today at 9:34 a.m. in New York. The stock climbed 38% in the past 12 months through yesterday, outperforming the 81-company Standard & Poor’s Financials Index and the broader S&P 500.
Legal bills fueled the bank’s first quarterly loss under Chief Executive Officer Jamie Dimon, and he has told investors the disputes will continue. Dimon, 57, had led the New York-based company to three years of record profit, including $21.3 billion for 2012, the most of any U.S. bank.
New York Attorney General Eric Schneiderman, who is co- chairman of the task force that helped secure the deal, said yesterday that the bank acknowledged it made “serious, material misrepresentations to the public.” That language was mirrored in releases from the Justice Department and the Inspector General of the Federal Housing Finance Agency.
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