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Another day, another billion dollar settlement for a bank involved in fraudulent mortgage practices that led up to the 2008 housing crash. The Justice Department announced Tuesday that it reached a $13 billion settlement with JPMorgan Chase & Co. around its packing, marketing and sale of rotten mortgage-backed securities, which then collapsed in value and, in some ways, took the economy with it.
The settlement is the largest ever reached between the government and another entity, the government’s press release said. As part of the deal, homeowners affected by the bank’s actions will get $4 billion in the form of reduced interest rates on mortgages, new loans and investment to reduce blight in hard-hit areas. Illinois will also receive a chunk of the settlement for losses sustained by its pension system when the housing bubble burst.
But within the settlement is a key term that concerned communities have long taken issue with when it comes to major settlements with banks—civil.
The settlement with JPMorgan only brings civil charges against the bank. While it doesn’t preclude that criminal charges could later be brought against the bank or its associates, the settlement only stakes out civil claims.
“It’s kind of a sad state of affairs that the operating assumption now is that all of these investigations end up with out of court settlements,” said Jordan Estevao , bank accountability director for National People’s Action, an advocacy group.
For most of the time since the 2008 crash, government investigations have centered on civil cases. In fact, the 10 most prominent cases against financial institutions for actions including defrauding taxpayers and lying about the value of assets have all been civil cases, a January 2013 investigation by PBS found.
The burden of proof for civil cases is lower than that of criminal cases, which require that guilt be proved beyond a reasonable doubt.
But other factors may be at play. News stories have traced the lack of criminal prosecutions to a set of guidelines known as deferred prosecution agreements issued by the Justice Department in 2008. Under the agreement, financial companies can avoid indictment if they promise to investigate and report on their own criminal activities.
For Estevao, at the end of the day, the goal of any settlement with a financial institution should discourage it from committing any of the same mistakes.
“There is somewhere in the realm of 6 [billion] to 7 billion dollars of underwater mortgages debt in the country. The settlement doesn’t start to address the scope of the problem.”