This article (via Manan Shukla) provides another look at the $13 billion settlement between JP Morgan and the Justice Department over securities fraud that was turned into a civil suit. The US Attorney General declared victory by announcing the largest CIVIL lawsuit settlement in history. In a speech at NYU Holder claimed that it was almost impossible to hold individuals responsible for criminal crimes in large corporations because the bad behavior is highly dispersed across the corporation. In other words, the corporate culture, and not any individual or group of individuals can be held responsible. We also learn the $4 billion of the settlement is not paid by JP Morgan; it is paid for by the holders of the mortgage securities who were forced to provide better terms to homeowners in default or at risk of default on their mortgages. JP Morgan is also able to reduce its taxable income by $7 billion when it takes a write off on the settlement. It is just another cost of business.
Most of the details in this article were provided by a former JP Morgan attorney who was an eye witness to the packaging of mortgages that did not meet JP Morgan's underwriting standards into securities that were sold to investors. Her warnings about legal problems that might result were ignored by JP Morgan executives in charge of compliance. JP Morgan did not want to get stuck with the bad mortgages that they had purchased. This was an act of fraud, and JP Morgan settled out of court with investors who bought those securities when they requested testimony from the attorney who had warned about the bad mortgages. JP Morgan and many other banks and loan originators were actively involved in criminal activity and the Justice Department used the threat of disclosure by the JP Morgan attorney to get Jamie Dimon to increase his offer of settlement from $3 billion to $9 billion.