J.P. Morgan Chase & Co. reached a $13 billion deal with the Justice Department that ends probes into the bank's sale of mortgage bonds, the largest amount paid by a financial firm in a settlement with the government.
“Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown,” Attorney General Eric Holder said in a statement. “J.P. Morgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm's behavior.”
The settlement could boost pension fund assets in California, Illinois and Massachusetts at least by a combined $400 million. New York and Delaware also stand to benefit from the settlement, but it could not be learned immediately how much will flow to pension funds in those states.
The $274.8 billion California Public Employees' Retirement System, Sacramento, is scheduled to get back about $261 million in damages from J.P. Morgan, while the $171.9 billion California State Teachers' Retirement System, West Sacramento, will get $19.5 million.
The $261 million to CalPERS will make the retirement system whole on $221.6 million in losses the pension fund sustained on investments in mortgage-backed securities sold or underwritten by the bank, according to a CalPERS news release.
According to a news release from Illinois Attorney General Lisa Madigan's office, J.P. Morgan Chase will pay a total of $100 million to Illinois' state pension funds as part of the settlement.
The firm will pay $72.4 million to the $41 billion Illinois Teachers' Retirement System, Springfield, and $16.2 million to the Illinois State Universities Retirement System, Champaign, which oversees $15.6 billion in defined benefit assets and $1.3 billion in 401(a) plan assets. The firm will also pay $11.4 million to the $13.4 billion Illinois State Board of Investment, Chicago, which oversees the State Employees' Retirement System, General Assembly Retirement System and Judges' Retirement System.
Massachusetts will receive $34.4 million to settle the state's investigation of J.P. Morgan securitization practices. A portion of the money will go the $53.9 billion Massachusetts Pension Reserves Investment Management Board, Boston, but the amount has not been fully determined, said Brad Puffer, spokesman for Attorney General Martha Coakley.
New York will receive $613 million; however it could not be learned how much state pension funds might stand to benefit. The $160.4 billion New York State Common Retirement Fund, Albany, was not part of the settlement, a spokesman said.
Delaware Attorney General Beau Biden said in a statement that various state agencies will receive a total of $19.7 million from J.P. Morgan Chase as a result of the settlement. Mr. Biden's spokesman Jason Miller did not immediately provide information whether the $7.7 billion Delaware Public Employees' Retirement System, Dover, is one of those agencies.
Bloomberg contributed to this story.