It was a big win this week for state Attorney General Eric Schneiderman when JPMorgan Chase agreed to pay $13 billion to resolve federal and state claims regarding the selling of risky, mortgage-backed securities, the housing bubble and the financial collapse of 2008.
Recall that while federal officials and other attorneys general were pressing for a “global” settlement in 2011 with some of the nation's largest banks, Schneiderman and Delaware Attorney General Beau Biden were primarily responsible for holding out for a tougher deal. Biden and Schneiderman didn’t want companies to get wide immunity from prosecution.
Eventually that led President Barack Obama to name Schneiderman in 2012 to co-chair the Residential Mortgage-Backed Securities Working Group to study the issue.
Last year, the task force filed a complaint against Bear Stearns & Co. – by then a unit of JPMorgan Chase – citing a broad pattern of misconduct in the packaging and selling of mortgage securities during the housing boom. It was the first complaint filed by the working group.
The settlement this week brought that suit to a close.
“It’s a vindication of the strategy I’ve been pursuing,” Schneiderman said at a State Capitol news conference. “I had substantial pressure on me ... to essentially give the banks a pass.”
New York will receive more than $1 billion of the $13 billion settlement. Schneiderman said $400 million will go to consumer relief programs (which includes offering refinancing at lower interest rates and new loans to low- and moderate-income families harmed by the financial crisis) and $613 million will be in cash – with 15 percent ($92 million) going to the state’s general fund. The rest of the cash would be “drawn down over a four-year period” to fund various housing and land programs, the attorney general said.
Schneiderman said he expect settlements with other big banks in the future.
“Other banks will follow,” he said. “There are more big paydays to come.”