JPMorgan deal should be model for future settlements

The government’s legal pursuit of JPMorgan Chase & Co. has struck some on Wall Street as unfair. CEO Jamie Dimon recently reached a tentative deal with the Justice Department to put an end to some of the embattled financial firm’s legal troubles, a settlement worth $13 billion in fines and consumer relief; it’s the biggest settlement ever announced involving a single company. In fact, this was a just outcome, and it should be a new model for holding financial institutions accountable in probes related to bad mortgages and the 2008 financial crisis. JPMorgan Chase is accused of selling mortgage securities that it knew were faulty, although it inherited many of the alleged abuses in its 2008 acquisitions of Washington Mutual and Bear Stearns. JPMorgan Chase’s supporters argue that it only purchased the two banks under duress, when pressed by government officials to do so in an effort to prop up the banking system in the early days of the credit crisis. That’s not entirely true, however. JPMorgan Chase had sought to purchase Washington Mutual several months before the crisis struck. Plus, even after paying the government settlement, JPMorgan Chase will come out way ahead on the deal. Washington Mutual had a $40 billion market capitalization when JPMorgan Chase purchased it for $1.9 billion, and its mortgage business’s performance has outpaced expectations ever since. No one will pity Dimon and his shareholders the $750 million Washington Mutual earned the bank last quarter. More in the Boston Globe here.

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