JPMorgan Chase & Co.’s (JPM:US) negotiations with federal and state authorities to resolve a series of investigations tied to mortgage bonds are focusing on a potential $11 billion figure, including $4 billion for consumer relief, a person familiar with the talks said.
The amount isn’t final, said the person, who asked not to be identified because the negotiations aren’t public. Those involved in the talks include the U.S. Justice Department, the Department of Housing and Urban Development and New York Attorney General Eric Schneiderman, who is co-chairman of a federal and state working group on residential mortgage-backed securities.
JPMorgan Chief Executive Officer Jamie Dimon arrived at the Justice Department in Washington yesterday to personally discuss the settlement with Attorney General Eric Holder, according to a person familiar with the meeting. Federal officials rejected a proposal from the bank earlier this week to pay between $3 billion and $4 billion to settle the probes, a separate person with knowledge of the negotiations said.
The talks are still fluid and the size of the settlement keeps changing, according to another person familiar with the matter. The people said they weren’t sure which claims may be resolved. The bank is trying to resolve as many probes as possible before the end of the third quarter on Sept. 30, according to people familiar with the bank’s thinking.
JPMorgan is seeking to negotiate a resolution to mortgage-bond investigations being conducted by federal and state authorities, including probes by U.S. attorneys in Philadelphia, Washington and Sacramento, California, according to another person briefed on the effort.
The bank has also tried to settle a $6 billion claim by the Federal Housing Finance Agency, according to the person, who also asked not to be identified because the talks are private.
Joe Evangelisti, a spokesman for the New York-based bank, declined to comment on the negotiations.
“Talks are ongoing,” Lauren Horwood, a spokeswoman for Sacramento U.S. Attorney Ben Wagner, one of the federal officials involved in the talks, said Sept. 25.
Last week, JPMorgan agreed to pay $920 million in penalties over $6.2 billion in losses stemming from derivatives trading by the bank’s chief investment office in London.
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Germany Rejects Plan for $68 Billion Fund to Aid Non-Euro Banks
Germany rejected a European Commission proposal to turn a 50 billion-euro ($68 billion) rescue fund into a bank backstop for member states outside the single-currency bloc.
The European Union’s balance-of-payments fund currently has about 40 billion euros available, after being used to help Latvia, Hungary and Romania. The commission, the EU’s executive arm, now wants to overhaul the fund and add a tool for bank aid that could be tapped by non-euro countries whose lenders fail next year’s continent-wide stress tests.
The German government and those of five other EU member states, including non-euro countries, reject the plan, which isn’t needed to maintain financial stability, a German Finance Ministry official said by telephone yesterday on customary condition of anonymity.
The Brussels-based commission wants a resource that can operate alongside the euro area’s 500 billion-euro firewall, the European Stability Mechanism, so that the entire 28-nation EU is braced for the results of next year’s stress tests. The goal is to reach a deal by the end of this year so that the tool can be ready by mid-2014, when the commission also hopes to have finished negotiations on when the firewall can provide direct aid to euro-zone banks.
The European Central Bank will be conducting balance-sheet reviews of major banks across the euro area as it prepares to take on new oversight duties in the second half of 2014. If all the proposed backstops are in place, the EU would have as much as 400 billion euros available to handle any banking problems that emerge.
China May Allow Non-Financials to Set Up Consumer Finance Units
The China Banking Regulatory Commission plans to allow non-financial companies to set up consumer finance companies, the regulator said in a statement on its website yesterday, citing revised draft rules and seeking public opinion.
Non-financial companies will require experienced strategic investors to meet regulatory requirements, according to the statement. The minimum stake requirement for major shareholders will be lowered to 30 percent from the current 50 percent, the commission said in the statement.
Consumer finance companies will be allowed to accept deposits from their shareholders in China, according to the statement.
Danish Regulator Cracks Down on Mortgage Banks as Risks Grow
Denmark’s financial regulator is preparing a set of guidelines due to be unveiled next year to stop mortgage banks falling deeper into a funding mismatch spawned by reliance on short-term borrowing.
The Financial Supervisory Authority, criticized in a government-commissioned report last week for failing to curb risk-taking in the years leading into the financial crisis, plans to set limits on issuance of bonds backing interest-only and adjustable-rate mortgages in the $500 billion market, Director General Ulrik Noedgaard said.
A government-appointed committee investigating the causes behind Denmark’s housing and banking crises said last week regulators should have done more to prevent an explosion in lending. More than one-third of the country’s commercial banks have closed since a property bubble burst in 2008, according to the Organization for Economic Cooperation and Development.
The FSA’s standards will be based on recommendations from the crisis committee, Noedgaard said. The clampdown on lending follows warnings from Moody’s Investors Service, Standard & Poor’s and the central bank that a shift away from 30-year, fixed-rate mortgages during the past decade is threatening Denmark’s financial stability.
Mitsubishi, Hitachi Charged With Rigging Bids for Car Parts
Mitsubishi Heavy Industries Ltd. (7011) and Hitachi Automotive Systems Ltd. (6501) are among companies charged by the U.S. with conspiring to rig bids for car parts.
The companies were named in documents filed yesterday in federal court in Detroit. They’re charged with conspiracy to restrain trade for fixing prices of automotive parts sold to carmakers including Ford Motor Co. (F:US), General Motors Co., (GM:US) Chrysler Group LLC, Toyota Motor Corp. (7203) and Honda Motor Co. (7267)
The U.S. Justice Department, which has been investigating price-fixing, bid-rigging and other anticompetitive conduct in the auto-parts industry, said on Sept. 24 that more than $874 million in criminal fines had been imposed and that 11 companies and 19 executives had been charged in the probe.
Competition authorities around the world have been investigating suppliers.
Dimon Going to Justice a ‘Brilliant Move,’ Farley Says
Richard Farley, a partner at law firm Paul Hastings LLP, talked about JPMorgan Chase & Co.’s negotiations with federal and state authorities to resolve a series of investigations tied to mortgage bonds.
JPMorgan Chief Executive Officer Jamie Dimon arrived at the Justice Department in Washington yesterday morning reportedly to discuss a settlement with Attorney General Eric Holder. Farley spoke with Stephanie Ruhle and Erik Schatzker on Bloomberg Television’s “Market Makers.”
For the video, click here.
Bankers Weigh In On EU Challenges At Frankfurt Conference
Bankers gathered in Frankfurt at the European Supervisor Education Initiative’s conference yesterday. Speakers included European Central Bank Governing Council member Yves Mersch, European Banking Authority Chairman Andrea Enria, ECB Vice President Vitor Constancio and U.S. Federal Reserve Governor Jeremy Stein.
Among the topics covered were setting up the single supervisory mechanism and the European economic outlook.
For the Mersch audio, click here.
For the Enria audio, click here.
For the Constancio video, click here.
For the Stein video, click here.
SEC’s White Says Investigators Will Focus Cases on Individuals
U.S. Securities and Exchange Commission Chairman Mary Jo White said her agency will focus on bringing more cases against individuals who violate securities laws rather than the companies where they work.
“I want to be sure we are looking first at the individual conduct and working out to the entity, rather than starting with the entity as a whole and working in,” White said in remarks prepared for delivery at a Council of Institutional Investors conference in Chicago yesterday. “It is a subtle shift, but one that could bring more individuals into enforcement cases.”
SEC investigators will also seek more mandatory compliance measures in settlements to prevent future misconduct and not just punish past wrongdoing, she said.
“Redress for wrongdoing must never be seen as a cost of doing business made good by cutting a corporate check,” White said.
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