The payment is meant to reimburse CalPERS, with interest, for a $221.6 million loss the pension fund sustained on investments in mortgage-backed securities sold or underwritten by the bank, according to a statement from CalPERS.
“We are very pleased with this settlement and the recovery for our members and their families,” says Henry Jones, chair of the CalPERS Investment Committee. “This helps bring closure and justice in this matter for those who were harmed and holds J.P. Morgan accountable for its actions.”
News outlets have been reporting for weeks that the total value of the settlement could approach $13 billion in fines, consumer relief and payments to misled investors.
According to the CalPERS statement, the Justice Department told J.P. Morgan that prosecutors had “preliminarily concluded” that the bank violated civil securities laws related to mortgage securities it packaged and sold from 2005 to 2007.
In a separate statement, Eric Schneiderman, Attorney General for the state of New York, confirmed the $13 billion settlement between J.P. Morgan and federal and state prosecutors. The agreement – the largest settlement with a single entity in U.S. history – resolves federal and state civil claims arising out of the packaging, marketing, sale and issuance of residential mortgage-backed securities before January 1, 2009.
The settlement requires the bank to pay $9 billion in cash and provide $4 billion in consumer relief, including mortgage modifications for homeowners at risk of foreclosure. New York State will receive more than $1 billion, including $613 million in cash and approximately $400 million in consumer relief for struggling New Yorkers.
Among other uses, the cash portion will also be directed to provide additional legal services and housing counseling for those affected by Hurricane Sandy.
The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a mixed state and federal body formed in 2012 to investigate wrongdoing in the mortgage-backed securities market. Schneiderman co-chairs the working group.
As part of the global settlement, J.P. Morgan acknowledged it made serious, material misrepresentations to the investing public about numerous residential mortgage-backed securities transactions.