JPMorgan Chase & Co. (NYSE:JPM) has been in talks with the Department of Justice to settle charges against it for $13 billion. However, The Wall Street Journal reports that the talks have stalled and the deal may fall through entirely.

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JPMorgan, DoJ disagree about certain parts

According to a report from Devlin Barrett, sources say that talks between the Justice Department and JPMorgan Chase & Co. (NYSE:JPM) may be breaking down on arguments about separate criminal charges as well as liability from the acquisition of Washington Mutual. In the past, the paper reported that the bank wanted to get part of the deal related to Washington Mutual bonds from a pool of funds designated for Washington Mutual’s creditors at the Federal Deposit Insurance Corp. (FDIC).

However, this made the FDIC basically the funder for part of JPMorgan Chase & Co. (NYSE:JPM)’s settlement. The problem is whether the bank or the FDIC is the one bearing ultimate responsibility for liabilities from Washington Mutual, which JPMorgan Chase & Co. (NYSE:JPM) acquired during the financial crisis. The DoJ wants to add language into its settlement with JPMorgan that none of the amount it pays in connection with the Washington Mutual liabilities will be passed on to the FDIC. Officials reportedly want the language to be added in order to prevent a penalty charged against a bank from being extracted from another government entity.

Over the weekend, the bank’s lawyers made a proposal which would also extend more legal protection against criminal investigations. However, sources told The WSJ that the DoJ wouldn’t accept that either.

What could happen to JPMorgan

Previous reports have indicated that JPMorgan Chase & Co. (NYSE:JPM) would pay a settlement totaling $13 billion for allegations about the sale of mortgage-backed securities to Freddie Mac and Fannie May. If the deal ends up falling through, the bank would face a significant setback in its attempts to resolve the numerous legal problems it has been facing. It would also mean that the DoJ would miss out on what would have been the biggest settlement it has ever finalized with just one company.

If the two sides can’t make a deal, the DoJ could then move on to a civil lawsuit against JPMorgan Chase & Co. (NYSE:JPM), according to The WSJ. Officials also may begin a separate criminal investigation that wasn’t even part of the proposed settlement.

Discussions are apparently still underway today, however, with much of them focusing on which parts of Washington Mutual JPMorgan Chase & Co. (NYSE:JPM) purchased when it took over the company’s operations. JPMorgan said it signed a deal with the FDIC to purchase the assets for less than $2 billion. The bank also said the agreement provided protection from future liabilities which resulted from the purchase. The FDIC seized Washington Mutual and auctioned its banking assets during the financial crisis, and it claims JPMorgan Chase & Co. (NYSE:JPM) is now liable for Washington Mutual’s problems.