Watchdog Group Seeks To Block JPMorgan’s $13B Settlement

Watchdog Group Seeks To Block JPMorgan’s $13B Settlement
Joe Mabel [CC BY-SA 3.0], via Wikimedia Commons

Better Markets filed a lawsuit against the DOJ on Monday to block the $13 billion settlement with JPMorgan Chase & Co. (NYSE:JPM) over bad mortgage loans sold before the financial crisis.

The non-profit group was founded in 2010 to advocate for tough Wall Street reforms.

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JPMorgan’s historic settlement

In November, JPMorgan Chase & Co. (NYSE:JPM) arrived at a settlement with the President’s RMBS Working Group of the Financial Fraud Enforcement Task Force. The Task Force comprised the Department of Justice (DOJ), several state attorneys general, the Federal Deposit Insurance Corp, the National Credit Union Administration and the Federal Housing Finance Agency.

The settlement involves JPMorgan Chase & Co. (NYSE:JPM) paying $13 billion for the resolution of all the actual and probable civil claims related to the sale of residential mortgage-backed securities.

Of the aggregate $13 billion settlement amount, $9 billion will be paid in cash to the above-mentioned regulators and State AGs, while the remaining amount will be used to provide assistance to the affected homeowners. The cash portion of the settlement consists of $2 billion of civil monetary fine to the DOJ.

In its lawsuit filed Monday, Better Markets said it was still appalled that the settlement gave JPMorgan Chase & Co. (NYSE:JPM) ‘blanket civil immunity’ for its conduct without sufficient judicial review.  Dennis Kelleher, chief executive of Better Markets said: “The Wall Street bailouts were bad enough, but now taxpayers are being forced to accept a secretive backroom deal that may well have been another sweetheart deal”.

DOJ can’t be prosecutor, jury and judge

Dennis Kelleher remarked: “The Justice Department can’t act as prosecutor, jury and judge and extract $13 billion in exchange for blanket civil immunity to the largest, richest, most politically connected bank on Wall Street”.

Better Market’s complaint doesn’t cite any precedents for challenges to similar Justice Department settlement with banks. Dennis Kelleher in a phone interview following his press release said, “I think it’s fair to call it a novel claim driven by uniquely damaging and far-reaching circumstances”.

The watchdog group also alleged that the Justice Department and U.S. Attorney General Eric Holder “have an apparent conflict of interest” because they have been criticized for failing to be tough enough on large Wall Street firms and “have aggressively used the $13 billion agreement to try to restore their reputations.”

Ben Protess of Dealbook notes while the watchdog’s lawsuit faces an uncertain future, the case could muddy the image of an investigation that put Wall Street on high alert. The deal, lawyers and bankers say, laid the groundwork for a number of other approaching settlements with big banks.

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Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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