(MoneyWatch) A tentative $13 billion settlement between JPMorgan Chase (JPM) and federal authorities over the bank's mortgage practices is unlikely to end the government's criminal probe into the financial giant.
The agreement between JPMorgan and the Justice Department is expected to include $4 billion to settle claims by the Federal Housing Finance Agency that the bank misled Fannie Mae and Freddie Mac about the mortgage backed securities it sold them before the 2008 financial crisis. It is also expected to include another $4 billion in consumer relief, and $5 billion in penalties paid by the bank.
However, critics are already raising doubts about the actual size of the fine and its impact on the bank.
"In the recent mortgage settlements, the non-cash component has had PR value and has been generally meaningless in economic terms," wrote Yves Smith in her blog Naked Capitalism. "The company gets credit for activities that are either in its financial interest (like modifying mortgages on its balance sheet to viable borrowers), or it would have done anyhow (giving homes to cities to be bulldozed), or it should have been doing all along (short sales). These items are mainly chits that give the bank cover to write down inflated assets on their books."
Even so, the fine is still the largest levied against a single bank concerning the financial crisis. The agreement ends a number of the government's civil investigations concerning the sale of securities. However, it does not end the criminal investigations of the bank which are still underway. Last month the U.S. Attorney's office in Sacramento, California, said it intended to bring a criminal case against JPMorgan. The criminal charges, if any are made, would likely target individual executives and not just the bank as a whole.
Between 2010 and 2013, JPMorgan paid nearly $6 billion in fines and settlements. Its total reserve for litigation and regulatory proceedings is currently at $23 billion. That number could rise. According to the bank's third-quarter earnings report, JPMorgan may need to set aside another $5.7 billion for possible future expenses.
There are also indications that other banks may be seeking settlements with the Justice Department. Over the weekend The Financial Times reported Bank of America was also in talks over a proposed multi-billion dollar settlement with Federal authorities.
The action against JPMorgan is the biggest move by the Obama administration against the banks whose actions played a major part in causing the crisis. (Last year attorneys general from 49 states reached a settlement with five large banks over charges the banks had mass-produced documents they used to evict homeowners.) That lack of action in the five years since the mortgage meltdown has spurred increasing public anger and the perception that the administration wasn't interested in prosecuting Wall Street.
So far investors are unfazed by either fine or the threat of more legal actions. As of mid-day Monday its stock was trading for more than $54 a share, 13 points above where it was a year ago and only a few a points below the $56 high it hit in August.