Should JPMorgan be held liable for business practices at two companies—Bear Stearns and Washington Mutual—it bought during the outset of the 2008 financial crisis, at the urging of the Federal Reserve and then-Treasury Secretary Hank Paulson?
Paulson refused to comment directly during an appearance Thursday on CNBC's "Squawk Box," but he was effusive in his praise of JPMorgan Chase boss Jamie Dimon's "courage" at the time to help prevent "a real disaster."
"I'm not going to comment on the merits of any legal case, legal settlement," Paulson said. "[But] it's hard for me to be totally objective, when I look at what Jamie Dimon and JPMorgan did. Because it's one thing to make an acquisition like that [of Bear Stearns], it's another thing to make a decision over a weekend."
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JPMorgan finds itself in the crosshairs of government regulators over allegations of sales of shoddy mortgage securities leading up to the crisis. Last week, Dimon met with U.S. Attorney General Eric Holder in Washington to discuss a possible settlement rumored to be in the $11-billion-range. Several of the government investigations stem from JPMorgan's purchase of Bear Stearns and Washington Mutual.
Appearing Thursday on "Squawk Box" with Paulson, billionaire investor Warren Buffett also won't comment directly on the legal problems facing JPMorgan, a stock he owns. But the chairman and CEO of Berkshire Hathaway said, "Regulators have a huge, huge club."
He added that companies are "dealing from a real point of weakness. If the regulator says, 'I want X.' And you say, 'Gee, only a 10th of X is fair.' And the regulator says, 'I still want X.' You probably write a check for X."
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Even though JPMorgan was, in Paulson's words, "begged" to make the Bear Stearns and WaMu acquisitions, the former Treasury secretary said the government was not providing any indemnity. "Jamie knew that at the time."
Paulson, a former Goldman Sachs chief, said he's not so sure these purchases weren't also in JPMorgan's interest. "But to make them under those circumstances, it took someone with a great deal of courage and confidence."
JPMorgan closed those deals before the Troubled Asset Relief Program financial bailout, which was signed into law by then-President George W. Bush five years ago Thursday.
"It's hard to prove a counterfactual," Paulson admitted to CNBC—but he contended that the crisis would have been much worse had it not been for JPMorgan's actions, which helped prevent "all these banks going down before Fannie and Freddie were stabilized" during subprime mortgage crisis.
—By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.