Today, we'll be talking about the Department of Justice's proposed settlement with JP Morgan Chase for $13 Billion
This settlement is about making a number of open investigations and lawsuits go away. The lawsuits are alleging that JPMorgan Chase committed securities fraud in their selling of Mortgage Backed Securities. In plain language, that means that JPMorgan lied about the quality of some products that they were selling.
What is a Mortgage-Backed Security?
In the old world, the bank that gave you the mortgage would also receive the monthly mortgage payments. But then Wall Street got involved. They said, "let's take thousands of mortgages and put them in a box! And let's call that box a mortgage-backed security (MBS)!"
Now every month, the mortgage payments will go into the mortgage-backed security box. Investors can then buy chunks of that box, and they will receive the monthly payments from the homeowners, instead of the banks.
These MBS are the securities that JPMorgan Chase is in trouble for misrepresenting & making fraudulent statements about.
$13 Billion dollars may sound like a lot of money, but it's not when you look into the amount of investigations and lawsuits that will be closed after this settlement. They include:
- The Federal Housing Finance Agency's lawsuit against JPM for losses on $33 BN of crappy MBS that JPM sold to them
- The NY Attorney General's lawsuit that claimed investors lost $22.5 Billion on the $87 billion total of crappy MBS that JPM sold to them
- A U.S. Attorney in Sacramento conducting both civil and criminal investigations related to JPMorgan's sale of crappy MBS
Now the good news is the settlement does NOT immunize JPMorgan from future criminal charges, but you should know that Jamie Dimon, the CEO of JPMorgan Chase has been getting really cozy with US Attorney General Eric Holder. He's been hacing personal phone calls with Holder and staff at the Justice Department since as early as July, negotiating his own settlement, as the NYTimes reported (http://dealbook.nytimes.com/2013/10/2...).
That's like a child negotiating with their parent over what their punishment should be for burning down the house and crashing the family car.
And it's not like the Justice Department is dealing with a first time offender with JPMorgan Chase. To name just THREE things that JPMorgan Chase has dones just in the last FOUR MONTHS!:
- In July, they were ordered to pay $410 million for manipulating electricity markets (http://bit.ly/emanipulate)
- In September, they were Ordered To Pay $309 Million For Illegal Credit Card Practices (http://bit.ly/illegalcc)
- In October, they were ordered to pay $100 million for manipulating the credit derivatives market (http://bit.ly/creditmanipulate)
If JPMorgan Chase had been committing petty drug crimes, their recidivism rate would've landed them in jail for the rest of the company's life!
We need to let the Justice Department know that they should not be negotiating with those they are investigating for crimes. Otherwise, we may as well rename The Justice Department "The JPMorgan Chase Field"!
We need more than just fines. We need Criminal Charges for Chase!
If this pisses you off the way it pisses me off, you should tweet @thejusticedept, or visit us at this link:
The settlement details are still being hashed out, so we'll continue following this story.
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