JPMorgan settled its civil liability with the Department of Justice and others stemming from the mortgage market, agreeing to pay $13 billion. The long rumored settlement included admissions concerning its conduct in the residential mortgage-backed securities or RMBS market which many believe was at the center of the market crisis. The resolution is the outgrowth of investigations conducted by the Financial Fraud Enforcement Task Force’s RMBS Working Group, announced by the President in his state of the Union Address two years ago.

The settlement is the largest with a single entity in American History, according to DOJ. It is, in essence, a roll-up of several actions. It includes $9 billion in settlement of several federal agencies state claims. The federal claims, asserted by DOJ and three agencies, were resolved with payments of:

DOJ: $2 billion as a penalty under the FIRREA;

FHFA: $4 billion to the Federal Housing Finance Agency;

NCUA: $1.4 billion to the National Credit Union Administration; and

FDIC: $515.4 million to the Federal Deposit Insurance Corporation;

The state claims were resolved with payments to:

New York: $613.8 million;

California: $298.9 million;

Illinois: $100 million;

Massachusetts: $34.4;

The remaining portions of the settlement benefits consumers in the housing market. Specifically, $4 billion is for relief to consumers harmed by the unlawful conduct of JPMorgan and the two firms it acquired, Bear Stearns and Washington Mutual.

Two critical points regarding the settlement concern admissions and other investigations. As part of the settlement the bank made a series of admissions, acknowledging its employees conduct in the RMBS market. The settlement did not resolve the parallel criminal investigation into the bank’s activities in that market, the potential liability of its employees in those markets or any of the other civil and criminal investigations involving the firm which are currently underway. Thus, while the settlement resolves a significant number of actions, it is not the end of potential liability for the bank or its employees.

The SEC was not a party to this settlement. While the agency has brought a number of actions centered on the market crisis, those actions typically centered on one transaction in the RMBS market. For example, the action brought against JPMorgan was based on the sale of interests in one entity. SEC v. J.P. Morgan Securities LLC, Civil Action No. 11-04206 (S.D.N.Y.). Likewise, its action against Bank of America tied to the mortgage market was based on the sale of interest in one CDO. SEC v. Bank of America, N.A., Civil Action No. 3:130-cv-0447 (W.D.N.C.). See also, In the Matter of UBS Securities LLC, Adm. Proc. File No. 3-15407 (Aug. 6, 3013)(sale of interest in one CDO).In contrast the settlement by the Working Group focuses on the years of the market crisis.