JPMorgan Chase & Co. (NYSE:JPM) has announced the settlement of its dispute with the Federal Deposit Insurance Corp (FDIC) for the acquisition of Washington Mutual (WaMu), in which JPMorgan expects to receive $645 million.
The settlement involves the sale of WaMu’s banking operations to FDIC during the financial crisis in 2008. A regulatory filing revealed that JPMorgan should receive $645 million for the sale of the banking operation for which FDIC is the receiver. JPMorgan stated that it will drop claims valued at more than $1 billion relating to the WaMu purchase in exchange for the settlement.
According to the US bank, Deutsche Bank will oversee 99 residential mortgage security trusts as part of its trustee role. The result is that Deutsche bank will have a claim against the estate. JPMorgan’s argument was that it should not be held liable for the various lawsuits that it has faced due to WaMu actions. A lawsuit was filed against FDIC in 2013 accusing the organization of failing to honor its massive indemnification responsibilities. FDIC officials countered with a claim that JPMorgan assumed the legal responsibilities of WaMu as part of the acquisition and that it had no claim over the assets worth $2.7 billion that were still under receivership.
The new settlement between the firms means that JPMorgan will no longer pursue the claims and will instead accept the $645 million as the settlement. The banking firm is currently the biggest bank in the US by assets. Its chairman and CEO Jamie Dimon stated that he anticipated massive legal costs from the settlement and that he would have settled for a much lower price. This means that he felt that the value of the settlement was a good deal for his firm.
JPMorgan’s lawsuit against FDIC comes a few weeks after the firm agreed to a landmark settlement of $13 billion with the US Department of Justice and a few other agencies for wrongly selling the mortgaged securities. A judge overseeing the case stated in June that JPMorgan was only responsible for WaMu’s liabilities in the books as per the day of the acquisition.