JP Morgan settles for $13bn

published 21 November 2013

US investment bank JP Morgan (JPM) has reached a $13bn final settlement with the US government over claims it mis-sold mortgage-backed securities in the run-up to the financial crisis. The payment is the largest fine on record for a US corporation. It absolves the Wall Street giant of further civil inquiries into the financial crisis, but it is still potentially open to criminal charges.

What the commentators said

The way Wall Street and much of the US financial press are carrying on, you'd think this settlement "is an unconscionable Marxist appropriation", said Matt Taibbi in Rolling Stone. Some commentators also say that the dodgy mortgages largely stemmed from Washington Mutual and Bear Stearns, which the Fed had asked JPM to buy to prop up the financial system, so the mis-selling wasn't really its fault. Please. JPM is getting off practically scot-free.

For starters, continued Taibbi, the fine is worth just half a year's profits to JPM, and $9m of it is tax-deductible. Moreover, the way these dodgy bundles of mortgages were misleadingly flogged to investors was essentially a Bernie Madoff-style Ponzi scheme, sucking in buyers to prop up the value of the lousy, packaged mortgages already in the system. Yet no individual at the bank will personally pay a dollar in fines or spend time in prison.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

What's more, JPM executives "knew exactly what they were getting" when they took on Washington Mutual and Bear Stearns. They were just more concerned with scooping up rivals at a state-subsidised, knockdown price in order to grow market share. The bottom line, concluded Michael Hirsch in Nationaljournal.com, "is that the biggest banks are so big today that almost no wrongdoing can threaten their existence".

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.