JPMorgan Chase's proposed terms for settling state and federal probes of mortgage-bond sales were rejected by the Department of Justice this week, according to two people familiar with the negotiations.
The Justice Department told the bank it won't agree to language the firm submitted Oct. 27, said the people, who asked not to be named because the talks are private. The sides split over JPMorgan's plan to seek reimbursement from the Federal Deposit Insurance Corp. for part of the settlement and the bank's bid for exemption from criminal liability in probes unrelated to residential mortgage-backed securities, one person said.
JPMorgan, led by Chief Executive Officer Jamie Dimon, 57, is trying to complete a tentative $13 billion settlement outlined in talks earlier this month. Part of the deal was finished with the Federal Housing Finance Agency last week, as the New York-based bank agreed to pay $4 billion to settle claims it sold faulty mortgage bonds to Fannie Mae and Freddie Mac. The firm and Justice Department have also been at odds over whether an additional $1.1 billion payment in the FHFA pact will be counted in the total settlement, one person said.
Shares of JPMorgan, the largest U.S. bank, erased gains and slid 0.3 percent to $52.55 at 3:40 p.m. in New York. Brian Marchiony, a company spokesman, declined to comment on the state of talks. The Wall Street Journal reported on the disagreements earlier today.
Attorney General Eric Holder told the bank the department wouldn't let JPMorgan seek reimbursement from the FDIC after resolving liability stemming from Washington Mutual Inc., the person said. JPMorgan acquired Seattle-based Washington Mutual's assets in 2008. That dispute was described by a person familiar with the talks on Oct. 25.
While discussions remain open, an agreement probably won't be reached this week, one person said.
Last week's deal with the FHFA included $1.1 billion to settles claims that the bank sold Fannie Mae and Freddie Mac defective mortgages that they packaged into their own securities. JPMorgan contends that amount is part of the broader $13 billion pact, one person said on the day that agreement was announced, while the government believes it would be in addition to the $13 billion, another person said.