JP Morgan 'to pay record $13 BILLION' to federal government over toxic mortgages that sparked the 2008 Great Recession

  • Struggling homeowners will be given a percentage of the payment 
  • Anyone who got a mortgage from certain companies before 2009 is eligible
  • People with high-rate mortgages could be set to benefit

By Emma Thomas

Published: | Updated:

American bank JP Morgan has agreed to pay a record $13billion dollars to the US government in the country's highest-profile case involving the 2008 financial crisis.

Sources close to the negotiations say the company has tentatively agreed to pay the money to settle allegations about the quality of mortgage-backed securities it sold before the crash.

Struggling homeowners will be given a percentage of the payment in a move to help people directly affected by the crisis.

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Settlement: JP Morgan is coming to a 'tentative' agreement to pay a $13billion settlement, a source says

Settlement: JP Morgan is coming to a 'tentative' agreement to pay a $13billion settlement, a source says

If the agreement is finalized, it would be the government's largest enforcement action related to the financial meltdown that plunged the economy into the deepest recession since the Great Depression of the 1930s.

The source, who spoke on condition of anonymity because the deal has not been finalized, said Attorney General Eric Holder, Associate Attorney General Tony West, JP Morgan CEO Jamie Dimon and the bank's general counsel, Stephen Cutler, negotiated the settlement in a Friday night phone call.

The agreement does not resolve a criminal investigation of the bank's conduct which is being handled by federal prosecutors in Sacramento, California. 

Mr Holder told the bank that a non-prosecution agreement was a non-starter — meaning that the Justice Department will continue to conduct the criminal investigation of the financial institution, said the person.

As part of the deal, the Justice Department expects JPMorgan to cooperate with the continuing criminal probe which looks at records between 2005 and 2007.

JPMorgan spokesman Brian Marchiony and Justice Department spokesman Brian Fallon declined to comment.

The $13billion settlement will be split into $9 billion for fines or penalties and $4 billion will go to relief for struggling homeowners.

This means $4billion will be earmarked to support families thrown into difficulties by the financial crash.  

Mortgages: If homeowners got a mortgage from Washington Mutual, JPMorgan or Bear Stearns before January 1, 2009, they could be in line for help

Mortgages: If homeowners got a mortgage from Washington Mutual, JPMorgan or Bear Stearns before January 1, 2009, they could be in line for help

Anyone who got a mortgage from Washington Mutual, JPMorgan or Bear Stearns before January 1, 2009, could be in line for part of the settlement.

People who live in deprived areas will also be given a helping hand to get on the property ladder as a clause in the settlement that orders the bank to help poorer areas.

Homeowners that are eligible for help could see their mortgage rate drop dramatically to the current market rate. People with high-rate mortgages could be set to benefit from hundreds of dollars of savings if their mortgage rate is changed.

JP Morgan will also waive closing costs or give $10,000 credit for people trying to buy in struggling areas.

When the housing bubble burst in 2007, bundles of mortgages sold as securities soured and the investors who bought them lost billions.

In the aftermath, public outrage boiled over that no high-level Wall Street executives had been sent to jail.

Some lawmakers and other critics demanded that the big bailed-out banks and senior executives be held accountable.



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