Exclusive: JPMorgan settlement complicated by Washington Mutual - sources
By Karen Freifeld and Emily Flitter
NEW YORK (Reuters) - JPMorgan Chase & Co's possible $11 billion settlement of government mortgage probes has been complicated by a dispute with the Federal Deposit Insurance Corp over responsibility for losses at the former Washington Mutual Inc, said people familiar with the matter.
The dispute, between the largest U.S. bank and the FDIC, could leave the federal agency on the hook for billions the bank is expected to pay as part of the settlement and substantially reduce the amount of the penalty JPMorgan actually pays to the government, some analysts said.
JPMorgan is seeking a "global" settlement of federal and state mortgage-related probes that could involve a payment of $7 billion in cash plus $4 billion for consumers, according to other people familiar with negotiations.
Last week, Chief Executive Jamie Dimon met with U.S. Attorney General Eric Holder to discuss a possible global settlement, and a source said the broad outlines could be reached any day. JPMorgan is also in talks with the U.S. Securities and Exchange Commission, the U.S. Department of Housing and Urban Development and the New York Attorney General's office.
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.
The bank has said in corporate filings and court proceedings in recent years that its liability is limited when it comes to reimbursing investors who lost money on Washington Mutual mortgage-backed securities.
The FDIC is disputing the matter in court.
Some fear the FDIC, under pressure from the Justice Department to join a global settlement, might agree to assume liability, a move that would effectively force another government agency to absorb billions of dollars in losses. Continued...