JPMorgan Chase & Co CEO Jamie Dimon met Thursday morning with U.S. Attorney General Eric Holder as the nation's biggest bank attempts to end investigations into its sales of shoddy mortgage securities leading up to the financial crisis.
The bank and federal and state authorities are trying to resolve the probes with a potential $11 billion settlement, according to sources familiar with the matter.
After the meeting at the U.S. Justice Department, which lasted about an hour, Holder told reporters that he had met with representatives of JPMorgan but did not mention Dimon by name. He declined to give details of the talks.
Speaking at a press conference on an unrelated topic, the attorney general also said the Justice Department plans to make announcements about financial cases in the coming weeks and months.
The meeting between Holder and Dimon, which was confirmed by two people familiar with the matter, came after settlement talks heated up this week following a threat by the Justice Department to file a lawsuit over a mortgage probe being led by federal authorities in California.
Legal sources said high-level meetings between corporate executives and the U.S. attorney general are unusual but not unprecedented, especially as big investigations move toward resolution.
JPMorgan is hoping to ease some of the pressure that regulators have been putting on the bank for more than a year. The bank avoided the worst losses in the financial crisis but has been under intense scrutiny since May 2012, when it said it was losing money on derivatives bets that became known as the "London Whale" trades.
Those trades ended up costing the bank more than $6.2 billion before taxes, and subsequent probes into how the losses happened revealed that Dimon, JPMorgan's outspoken chief executive, had a dysfunctional relationship with regulators. (ID:nL1N0C6E8E)
The meeting between Dimon and Holder, the highest-ranking U.S. law enforcement official, marks another step in the nation's attempts to sort out responsibility for the financial crisis that hit five years ago.
It wasn't just Dimon and Holder in the room. Dimon brought with him the bank's general counsel, Steve Cutler, and outside counsel Rodgin Cohen, a partner with Sullivan & Cromwell, according to a source familiar with the matter. Joining Holder was Deputy Attorney General James Cole and Associate Attorney General Tony West, the source said.
Negotiations this week have involved JPMorgan paying as much as $7 billion in cash and $4 billion in consumer relief to settle several investigations - a hefty sum, but representing little more than half of the bank's 2012 profit of $21 billion.
The New York state prosecutor's office has been participating in those talks because it is part of a working group formed by President Barack Obama in January 2012 to investigate misconduct in mortgage securities that contributed to the financial crisis.
The talks have been described as "fluid" and filled with uncertainties over exactly which claims against the bank would be resolved.
Dimon's meeting with Holder shows how high the stakes are for JPMorgan and how Dimon is attempting to put the bank's legal and regulatory headaches to rest.
JPMorgan's litigation costs totaled $17.3 billion over the last three calendar years, according to the company's annual report.
A settlement of the government mortgage cases in the $11 billion range would likely include claims from the regulator of Fannie Mae and Freddie Mac, which has sought some $6 billion from the bank over risky mortgage securities sold to the government-sponsored entities, according to two people familiar with the matter.
Some flexibility in the talks comes from negotiating which liabilities would be covered in the announced amount of a deal, one of the sources said.
In addition to the California lawsuit which the government had planned to file earlier this week, prosecutors in Philadelphia and New Jersey are also working on cases. The additional cases include probes of the mortgage businesses of Bear Stearns and Washington Mutual, two banks that JPMorgan bought when they collapsed in the financial crisis.
New York Attorney General Eric Schneiderman also sued the bank last October over mortgage-backed securities packaged and sold by Bear Stearns. It was not clear if JPMorgan would be able to include the New York state lawsuit in the settlement being discussed.