While reports earlier this week seemed to confirm that a settlement was on the way, it appears that talks between banking giant J.P. Morgan & Chase and the Department of Justice (DOJ) are on shaky ground. The bank hoped the talks would end investigations into the mortgage backed securities it sold running up to the great recession, but it appears the discussion could still be subject to breakdown. Once again the $13 billion settlement proposed Oct. 27 by JPMorgan is on the brink of collapse.
The sides are divided over the number of probes that the settlement should end, the protection from investigation the bank should receive, the responsibility it should bear, and the details of the payment. The rift could be too much ground to cover for an increasingly impatient DOJ.
While the drafted proposal JPMorgan submitted earlier this week maintained the monstrous payout figure, it also inserted language that gave it protection from additional criminal probes, something that Attorney General Eric Holder has said he is not willing to accept. There are also concerns around whether or not JPMorgan has any responsibility for liabilities attached to Washington Mutual, which the bank acquired after the financial collapse.
In addition to these lingering problems, there are also details to be ironed out regarding which agency will be paid what amount. While the bank stated previously that it would pay the Federal Housing Finance Agency $5.1 billion, government lawyers have said that tab should only be $4 billion, claiming that the bank cannot use a separate $1.1 billion settlement, in which it agreed to in repurchasing poorly preforming mortgages from Fannie Mae and Freddie Mac, as part of the DOJ settlement.
Currently the $5.1 billion payment being made to be the FHFA is tax deductible, which will save JPMorgan an estimated 1.5 billion in taxes and shift some of the burden taxpayers, reports the Wall Street Journal. Other parts of the settlement could also be tax deductible, saving the bank even more in the long run.
The DOJ has also been trying to remove language from the agreement that would stop any of the payment from being the responsibility of the Federal Deposit Insurance Corporation.
Needless to say, the settlement talks have been a rollercoaster ride for all involved. If the bank and the Department of Justice are unable to come to an agreement, J.P. Morgan could be subject to numerous civil and criminal probes, which could ultimately mean an even larger tab then the $13 billion its currently on the hook for.
If you’re interested in learning more about the progress of this story check out InsideCounsel’s coverage