Negotiations between JPMorgan Chase and U.S. officials to resolve allegations the bank mis-sold mortgage securities in the run-up to the financial crisis are focusing on how credit and blame will be distributed in any settlement, people familiar with the matter say.
As talks enter their second week, lawyers for the bank and the government are continuing to work on the details of a deal, which could see JPMorgan pay about $1 billion in penalties and consumer relief.
JPMorgan is seeking to avoid breaking down the claims by the entity that securitized them. The U.S. government's allegations involve JPMorgan, and two entities it acquired during the financial crisis, Bear Stearns and Washington Mutual, these people say.
The bank, which has implied most of the faulty securitizations were done by Bear Stearns and WaMu before they were acquired, would prefer to not break down the claims to avoid shining a spotlight on JPMorgan, these people say.
There is also an impression that the government agencies – the Department of Justice, Federal Housing Finance Agency and New York state attorney-general – are considering how to best allocate credit without having any agency appear weak. It is not clear how strong a factor that is, since settlements usually specify how much each government entity will receive.
It is possible a settlement might not be reached if both sides cannot reach an agreement on admissions of wrongdoing by JPMorgan, these people say. The DoJ is pressing for admissions as part of any settlement, while the bank wants to limit the admissions to avoid consequences in private litigation.
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