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Is the $13B JPMorgan settlement actually greenmail?

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Jonathan Weil compares the $13B settlement by JP Morgan to greenmail in his article, The JPMorgan Settlement Isn’t Justice.

After having read the settlement, he realizes this is worse than the typical case of neither admit nor deny guilt wording we usually see in settlements. In spite of the press releases from the government saying JPM admitted misrepresentation, the settlement and statement of facts is worded so vaguely that there aren’t actually any details of what the government believes was done wrong.

Thus, there is nothing to deny:

(T)he Justice Department didn’t lodge any claims against JPMorgan for breaking that law or any other. This was an out-of-court settlement. The Justice Department didn’t file a complaint. No judge’s approval was needed.

The agreement did incorporate an 11-page statement of facts that explained in vague terms what JPMorgan did. Yet none of the acknowledgments by JPMorgan in that document hurt the bank. JPMorgan didn’t admit liability or even any mistakes. That’s no better than the old “neither admit nor deny” boilerplate.

So, there was no complaint filed, which would have contained explicit accusations of wrongdoing. His reading of the settlement agreement and statement of facts doesn’t reveal any specific accusations either.

One sentence in the settlement causes Mr. Weil lots of confusion. That’s the one where the government says they found information during the investigation that would compromise their case. Perhaps that sentence is poorly worded. On the other hand, perhaps that is a hint that the government knew they couldn’t prove their case.

When teams of lawyers from opposing sides pour over a settlement document, it is possible one sentence is worded poorly, but unlikely.

Justice or greenmail?

Whether you think the big banks are big bad meanies who directly caused the Great Recession or are unjustly getting all of the blame but deserve far less than 100%, this doesn’t look like justice.

The better description is greenmail, according to Mr. Weil:

This isn’t justice. It’s more like the greenmail that companies sometimes pay to corporate raiders who demand premium prices for their shares in exchange for going away. No individuals got pinched. We don’t know much about the details of what the Justice Department’s investigation found. It’s unclear why prosecutors didn’t accuse JPMorgan of fraud, although one possible explanation is that the government lacks proof.

I previously mentioned an earlier column by Mr. Weil in which he said he didn’t find any adverse admissions by JPM in the settlement. The key thing I drew from his earlier comments are that JPM acknowledged being told that a staff person and vendors thought there were problems with the loans but the settlement didn’t say whether or not JPM agreed with those statements.

There’s a world of difference between those two ideas: being told someone else thought there was a problem and admitting that you knew there was a problem.

So, I’m not the only one who thinks there is something unsettling in the settlement.

I’ve not read either the settlement agreement or statement of facts. Will try to do so in the next few days.  So I can keep track of them, here are the links to the DoJ press release, the settlement agreement, and statement of facts.

Written by Jim Ulvog

November 26, 2013, 7:34 am at 7:34 am

Posted in Other stuff

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