Jamie Dimon’s JPMorgan Chase has finally agreed to terms with federal and state regulators on a record-setting $13 billion settlement over toxic mortgage securities — and the complex deal is expected to be announced Tuesday.
In addition to compensatory payouts and a fine, Dimon agreed to hire an outside monitor to oversee the dispensing of billions in consumer relief.
That Dimon, chairman and CEO of the country’s largest bank, will have to work with an independent monitor could be seen as something of a reputation buster for an executive seen by many as the best and most trusted on Wall Street.
The pact will also include JPM forgoing claims on some $4 billion in assets from a Federal Deposit Insurance Corp.-led receivership of failed bank Washington Mutual, acquired by JPM during the 2008 financial crisis.
Regulators wanted to avoid having Dimon use billions in claims to shrink JPM’s final settlement tab to roughly $9 billion.
However the agreement with the FDIC will allow JPMorgan to “preserve the right” to pursue claims related to the FDIC that fall outside the long-awaited accord, sources said.
A JPMorgan spokesman declined to comment.
The $13 billion settlement includes:
– Compensatory payments of $7 billion, which includes the $4 billion paid to the Federal Housing Finance Agency earlier this month;
– A fine of $2 billion; and
– $4 billion in broad consumer relief.
The consumer-relief portion could include aid programs such as mortgage principal reductions for those who owe more on their mortgages than their properties are worth.
The relief funds could be earmarked for low-income housing markets, with some $300 million to $500 million designated to help homeowners restructure housing debt, according to WSJ.com, which first reported that a settlement could be announced Tuesday.
Regulators and JPMorgan had been unhappy with the pace of the deal talks led by Holder’s team — especially after Dimon two months ago took an unusual trip to Washington to speed up negotiations and smooth out rough patches, sources familiar with the talks say.
The complexity and number of parties involved in the deal led to the delay, those sources added.
Dogged by legal woes since its “London Whale” trading scandal last year, JPMorgan took the unusual step of announcing as a part of its third-quarter results that it set aside a whopping $23 billion to address a laundry list of litigation, including Tuesday’s deal.