JPMorgan Chase & Co.’s preliminary $13-billion (U.S.) deal to resolve federal and state probes into its mortgage bond business has hit two stumbling blocks, a person familiar with the talks said on Tuesday.
In a draft settlement circulated late Sunday, JPMorgan sought a provision that effectively shut down any criminal inquires into the bank’s packaging and sale of mortgage securities apart from an investigation from California prosecutors the bank has already disclosed, the person said.
The bank had previously agreed to keep all criminal probes out of the settlement, the person said.
Also at issue is a long-running disagreement between the bank and the Federal Deposit Insurance Corp. over legal liabilities from JPMorgan’s takeover of Washington Mutual assets and obligations during the financial crisis.
JPMorgan, which acquired Washington Mutual from the FDIC for $1.9-billion at the height of the financial crisis, has disputed its responsibility to cover losses incurred by investors on the failed thrift’s mortgage securities.
Reuters reported exclusively on Sept.30 that the dispute threatened the preliminary deal.
The Department of Justice has sought a provision in the settlement that prohibits JPMorgan from seeking to push the WaMu liabilities from the settlement onto the FDIC.
The DOJ has led negotiations to resolve multiple state and federal probes into JPMorgan’s mortgage bond business and that of the firms it acquired during the financial crisis.
On Friday, one of the agencies, the Federal Housing Finance Authority, grew impatient waiting for the completion of the package deal and separately signed with JPMorgan a $5.1-billion settlement, of which $4-billion had been seen as counting toward the $13-billion amount.
JPMorgan chief executive Jamie Dimon met with U.S. Attorney General Eric Holder in late September in Washington to reach the tentative agreement on the package deal.
Holder and Dimon are both overseas this week. Holder is in Morocco attending a conference and meeting with local counterparts. Dimon is travelling in Europe this week, according to a person familiar with his itinerary.