Justice Department announces $13 billion settlement with JPMorgan

NEW YORK, Nov. 19 (UPI) -- The largest U.S. bank, JPMorgan, has agreed to a $13 billion settlement for misrepresenting bonds prior to the recession, the Justice Department said Tuesday.

The department said the settlement was the largest ever against a single firm. It covers allegations revolving around mortgage-backed securities that became the trigger for the economic recession that is viewed as the worst since the Great Depression of the 1930s.

As part of the settlement, the bank "acknowledged it made serious misrepresentations to the public -- including the investing public -- about numerous residential mortgage-backed securities," the department said.

The settlement covers claims against JPMorgan and Bear Stearns and Washington Mutual, two banks that JPMorgan absorbed as the financial crisis was unraveling in 2008 and 2009.

However, the settlement "does not absolve JPMorgan or its employees from facing any possible criminal charges," the department said. Ongoing investigations on related charges could force the bank and the Justice Department to revisit similar allegations again.

"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.

"No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability."

The residential mortgage-backed securities were flawed, essentially, from the get-go, the department said, as "employees knew that the loans in question did not comply with those [underwriting] guidelines and were not appropriate for securitization."

"But they allowed the loans to be securitized -- and those loans sold -- without disclosing this information to investors," the department said.

The Wall Street Journal reported Tuesday that the deal was held up by the final piece of the agreement, which was $4 billion to be designated as help for homeowners that the bank can distribute in a variety of ways, including spending money demolishing abandoned homes in an effort to help neighborhoods hit by urban blight due to foreclosures.

Between $1.5 billion and $1.7 billion has been designated as money to go to reduction of principal on mortgages held by JPMorgan that can be applied to loans considered underwater, meaning loans in which there is more owed on the loan than the house is worth.

About $2 billion has been earmarked for loan origination for families in need or for principal reduction on homes that have been abandoned, but have not yet been seized by the bank, the Journal said.

The settlement concludes one more legal dispute for the largest U.S. bank, but others remain, including investigations of energy market manipulation, possible misconduct that resulted in $6 billion in trading losses in 2012, and complicity in the Bernard Madoff Ponzi scheme in the form of ignoring red flags about Madoff's operations.

In addition, private lawsuits are hounding the bank, including a $10 billion lawsuit brought by Deutsche Bank National Trust Co. concerning securities issued by Washington Mutual, which JPMorgan absorbed in 2008.