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Business

JPMorgan’s $13B settlement with DOJ at risk of falling apart

By
Mark DeCambre
Published Oct. 29, 2013, 9:40 p.m. ET

Federal officials have rejected a proposal by Jamie Dimon’s JPMorgan Chase to have its sweeping $13 billion mortgage bond settlement offset with a reimbursement from the FDIC, sources said.

The rejection of the bank’s Sunday-night proposal by the Department of Justice threatened Tuesday to blow apart the massive multi-agency settlement, although high-ranking representatives close to the talks insist negotiations remain on track and could wrap up as soon as this week, sources said.

JPM’s tentative settlement, which would be a record, includes a $5.1 billion deal with the Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, plus claims by the Securities and Exchange Commission and the New York and California state Attorneys General.

The settlement was expected to be complete by last week until, as The Post exclusively reported, the late entry into the talks by the Federal Deposit Insurance Corp.

JPM wants to be able to pursue claims against an FDIC-run receivership for claims related to Washington Mutual, which JPM bought in 2008, the Wall Street Journal reported.

The DoJ rejected that proposal.

Regulators also are wrangling with the bank over how much of the $5.1 billion FHFA deal should go to the government.

“Nothing’s changed from last week,” said one source in the wake of the DoJ rejection of the bank’s proposal. “Talks are still on track.”

JPM feels it has claims of roughly $4 billion against the receivership — representing bad assets Dimon’s bank inherited when it bought WaMu in the crisis-era deal.

The FDIC and JPM have been locked in legal disputes over WaMu claims for the past three years, well before the DoJ deal was in discussion — or rejected.

Led by general counsel Stephen Cutler, JPM also has grown weary of the protracted negotiations.

Dimon has been irked by the back-and-forth negotiations at times. Others familiar with the discussions criticize the DoJ for political grandstanding as it hashes out the largest bank-regulator settlement in history.

Bitterness has also played out between regulators, with some expressing irritation with the DoJ’s pace.

Indeed, the FHFA had hoped to wrap up its own deal with JPM weeks ago until finally, breaking ranks with the other agencies, it struck its own deal last week, sources added.

The FDIC was ticked off for being brought into the negotiations so late, sources said.