It's Official: JPMorgan Signs $13B Settlement

JPMorgan agreed to pay a record $13 billion following a probe of its mortgage operation, Washington Mutual bad loans, and mass waivers on misrepresented products.

Specifically, JPMorgan knowingly bundled toxic loans into packages sold to unsuspecting investors.

But all's well that ends well.

JPMorgan was assessed a $13 billion fine but apparently did nothing wrong. As an added bonus, $7 billion of that $13 billion settlement is tax deductible.

From Bloomberg News:
JPMorgan Chase & Co's record $13 billion deal to end probes into mortgage-bond sales may save the bank billions more because of what the agreement lacked: an explicit admission of wrongdoing.

Employees of JPMorgan and two firms it acquired knew some of the loans included in bonds didn’t meet underwriting standards, a fact not shared with buyers of those securities, the U.S. Justice Department said yesterday in a statement. That doesn’t mean the company misled investors, said Chief Financial Officer Marianne Lake, disputing how some state and federal officials characterized the deal.

No Admission
“We didn’t say that we acknowledge serious misrepresentation of the facts,” Lake said yesterday in a conference call with analysts. “We would characterize potentially the statement of facts differently than others might.”

JPMorgan acknowledged the statement of facts -- the settlement’s official narrative of events leading up to the infractions -- without admitting violations of law, Lake said. The bank also denied any violations in an accompanying slide show.

Penalty for Doing Nothing Wrong
As compensation to homeowners for doing nothing wrong, JPMorgan will devote $4 billion to consumer relief for affected homeowners, including principal forgiveness, loan modifications and efforts to reduce blight.

Of the $4 billion settlement with HUD, at least $1.5 billion will go toward loans the bank is forgiving. As much as $500 million will go to change the terms of loans to lower monthly payments.

The remaining $2 billion will be for assorted purposes, including new loans for low- and moderate-income borrowers in areas that have been hard-hit by the housing crisis and for demolition of abandoned homes.

Tax Deductions
JPMorgan's $2 billion penalty (also for doing nothing wrong) isn’t tax deductible, but $7 billion in compensatory payments are, according to Chief Financial Officer Marianne Lake in the conference call.