tv Inside Story Al Jazeera October 21, 2013 5:00pm-5:31pm EDT
>> this is al jazeera live from new york city. i'm tony harris. here's a look at the top stories. two shootings in reno. the associated press has the familteacher identified as michl landsbury. secretary of state john kerry in france it to discuss middle east peace bu. president obama addressed the problems plaguing the affordable
care act. he said everything was good despite the problems of online sign up. new jersey governor chris christie withdrew his legal opposition to same-sex marriages. and one of china's largest cities harbin shut down because of choking smog, and declaring air pollution as a major cause of cancer. those are the headlines. i'm tony harris in new york city. inside story is next on al jazeera. >> the nation's biggest bank may be on the verge of paying the biggest penalty t to date in the wake of the financial markets
collapse. that's tonight's "inside story." >> hello, i'm libby casey in washington. in the five years since the mortgage security meltdown triggered the financial crisis and the great recession many have wondered whether the big banks on wall street will ever be held responsible for their role. the answer is yes. according to insider reports, an agreements with struck between bank ceo jamie dimon and eric holder. if it holds up homeowners could get relief and the bank could still be subject to criminal prosecution. jp morgan chase reached a tentative deal with the justice department on friday.
it finalized an agreement that was hashed out for months, that would settle a longstanding issue of toxic mortgages leading up to the crash, but it would not keep them from being held for criminal liability. could jp morgan be held for wrongdoing. $4 billion of the settlement would go to the federal housing finance agency for mortgage back security sales. $4 billion would go to helping struggling homeowners and another $5 billion would pay fines. formerly known as washington's darling, jp morgan's payout is the biggest action to date and may set the stage for more deals with other banks involved in the mortgage securities meltdown. the american government seized
two mortgage giants fannie mae and freddie mac and let lehman brothers collapse in the largest corporate bankruptcy in history. it brought about recession that saw massive job losses, wage stagnation, since then the government has set up programs to help main street's financially wounded. in february 2012 a national mortgage settlement was announced to help struggling homeowners. the deal aimed to assist more than 1 million struggling homeowners by offering up to $2,000 to people who lost their homes in the collapse. allowing underwater but current homeowners to refinance, and partially forgiving loans through principle reductions. housing advocates argue that the in fact mortgage settle did not
reach far enough. in a recent earnings report jp morgan published that it's total reserve for legal issues is $23 billion. if the latest government deal goes through more than half of the allotted amount would be depleted. >> joining us now to discuss the tentative settlement with jp morgan and what it means for ordinary americans are dennis heliher an. what standards out? what is most significant on this? >> really, what stands out at first glance is this $13 billion figure. it is probably the largest settlement that the justice department has ever negotiated with one company. it does include several investigations outside of the justice department, but it still such a large top line number
that does stand out. >> criminal prosecution is not off the table. how significant is that? >> it appears to be significant. but frankly they have not prosecuted any of the banks and the attorney general said they're too big to prosecute and too big to jail. although they're not going to settle the criminal piece of it, it is unlikely that this will bring serious criminal charges. frankly if they do they'll follow their past pattern and go after minut minnows and not go r the bank management for egregious systemic violation of the laws not only by the minnows but the whales, the executive supervisors as well, and it looks like they're going to get away with it again. >> talk to us about what dennis
just said, would we see the big names or is the bank in your estimation fairly immune from any serious dig into what they've been doing? >> i think that we are now five years--more than five years out from the height of the financial crisis, and we really haven't seen case from the justice department against higher level executives for the conduct that fueled the crisis. so i think it is relatively low problem abilitprobabilitying bue department does have an open investigation and they are trying to build a case. they do still have some statute that they can turn to, there is possibility but i don't know if the probability is that high. >> as we look at the break down of numbers, what this $13 billion is likely to go towards, the $5 billion in penalties, $4 billion in consumer' leave. what are those numbers? >> first of all i would like to say the $13 billion is a big
number in terms of wall street. it's the biggest we've seen but it's still the drop in the bucket where $12 million are still under waters on their mortgages. being underwater is the number one predictable in going into foreclosure. $4 billion going toward mortgage relief, on the face of it looks good but we don't know the details, we don't know how it's going to be enforced and we don't know how the binge are going to follow up with it. there was of million dollars set aside several years ago. although we were promised that the million people would get relief from principle reduction, it has nowhere gun to approach that relief. so make sure that the details are followed up, made public and proper enforcement is put in place for this. >> what do you want to sow from jp morgan chase, and what is
realistic in terms of admission of liability and they didn't have a handle of things as the markets collapse? >> i think what we've seen is a little bit of see change with the regulate whose are getting some admissions. but the admissions so far have been incredibly modest and they've been tiny as to relevant matters. the real question is whether or not the department of justice is going to extract real admissions as to real wrongdoing, or if once again the private big banks are going to outnegotiate the regulators and prosecutors and get admissions that are meaningless. >> i think it does have consequences of private lawsuit of investors abroad, and that's one of the reasons why you haven't seen admissions in the past. >> it would open jp mor morgan chase. >> to further liability. >> are we likely to see anything come out? >> they're going to have to admit to something but they're
usually narrowly tailored. they did get--this is over the london whale trades. >> let's remind everyone what the london whale glades th are. >> yes, they paid a lot of money and got-- >> $100 million. >> $100 million. >> and they got an admission, but the admission was narrowly tailored around one day of conduct. that leaves open their private liability to a pretty small window. >> we're going to take a quick break. when we come back we'll continue the discussion of the tentative deal between jp morgan c the government. this is "inside story." news stories? >> they share it on the stream. >> social media isn't an after-thought, it drives discussion across america.
markets, an so whether or not ts deal goes through as reported, it's being negotiated as a very high level between the attorney general and jamie dimon. they had this phone conversation on friday. dennis kelleher s this usual? >> it's shockingly unusual and unprecedent: there are 300 million americans and there aren't two dozen who could pick up the phone and call the attorney general of the united states. it's been reported with the attorney general with his top lawyers were hours away from a press conference to announce the filing of a lawsuit against jp more man chase for what is unquestionly an egregious, wrongful probably criminal conduct. yet, at the last minute jamie dimon picks up the phone and calls the attorney general to
talk to him personally, and the lawsuit is called off. if you want a window of the double standard of justice where wall street with wealthy bankers and companies get one set of rules and justice, and main street gets the rest, this illustrates it perfectly. it's one of the reasons why the banks on wall street are not only too big to fail and too big to manage but they have too much power over our government. nobody gets to call up the attorney general of the united states and first call off the lawsuit and the press conference and then buy his way out of it p and jamie dimon did. >> as we look back the former treasury hank paulson encouraged jamie dimon to get involved and take over some of the other banks that were in real trouble. is that relationship important, jordan? >> it's absolutely important and super significant. since the financial crisis and since before the financial crash
banks made a decision that it was better investment of their dollars to spend it on lobbyists, campaign contributions and government so they can get out of things like, oh, paying taxes, and following the regulatory obligations. thithis is exemplary, a few yeas senator dick durbin made a statement after we lost a fight to help homeowners, that banks own the place. speak of about congress, he said banks own the place. that's a bad situation for this country. >> but to push back, better to have $13 billion going to things that we talked about including consumer relief, including getting the fines paid, better to have that than nothing at all in long-drawn-out lawsuit? >> it's better than nothing but we have a lot more to do to resolve this crisis. let me put a fine point on that. the housing crisis in this country is not over.
12 million people are underwater in their mortgages and have a high likelihood that they're going to bankrupt. >> we'll talk more about that in a while, but i want to stay with the issue of jamie dimon and his role. did he open himself up to potential liability by calling the attorney general? is it one of those things that you say could be used against new the court of law, was that a risk he took? >> i think it is very unusual for there to be negotiations between the attorney general and the ceo of a company, that's definitely unusual. but i think that in taking that kind of risk i think it was jp morgan's attitude that, okay, let's show that we're very serious about getting this resolved. >> what is the lobbying presence of jp morgan chase. >> it's unprecedence. they've poured 10s of hundreds
of millions of dollars directly into lobbying. lobby something only one part and gets a lot of attention because it's public disclosure but there is also all these front groups, trade groups, pr and most importantly the campaign finance contributions which add up to hundreds and hundreds of millions of dollars more. what wall street has effectively done is taken their economic power and bought massive political power which is why a too-big-to-fail bank like jamie dimon can call up the attorney general. this will cost the country no less than 13 trillion-dollar. jp mor morgan chase in one lawst had allegations of violations related to $33 billion. when you add up all the wrongdoing and all the multiple investigations that they're settling here? $13 billion isn't much at all.
>> aruna what leverage does the government have, and what leverage did they have going into thinks negotiations? >> i think a lot of. when you talk about the government negotiating with the private entity, especially when you're talking about a financial institution that has the threat of state licenses removed and other--ruining relationships with other regulators, so i think the government does have a huge amount of leverage. >> and we had seen prior to this that news reported $11 billion because jp morgan chase wanted to be rid of any criminal exposure. they wanted that off the table. what changed? >> it's a little bit unclear. over the last three or four weeks we've seen these numbers go up, it sounded like on friday night they had a conversation between the justice department and the bank at the highest
level, and they negotiated $2 billion more dollars but it's unclear like what that was in order to resolve. >> and what else does jp morgan chase face? tell bus california, and what the investigation from prosecutors look like. >> in terms of criminal investigation? >> yes, yes. >> that's sort of a parallel case. it's about similar conduct. i think that we know that it is about jp morgan conduct itself, but potentially some legacy bearer conduct as well. and i think they must think that they have a reasonbly strong case at this point. but they think that it's sort of to the point that they feel they can file charges. >> jordan, why is it significant? this is the civil aspect of things. news report say that this announcement on a fry came right on the eve. the phone call came right on the eve of perhaps a press
conference, civil charges, why is criminal significant? >> because thus far it really seemed like the banks and financial industry and ceos and bank executives have lived under a separate set of laws than the average american. there is no question. if you ask the average person on the street who should bear the brunt, and who should be held responsible for the financial crash? it's bankers. and not one patiencer has gone to jail. people want to see that, that the law applies to the rich as well as ordinary people. and then as for the amount, again, they say that some of it is going towards $4 billion is going towards homeowners, but we don't know how it's going to work. we don't know the mechanics of it. >> what precedence does this set? >> you can buy your way out of massive liability almost regardless of how many laws
you've violated. you get to a very important point here. the other very bad precedent is if give them enough money you can buy your way out of jail card. the crime spree on wall street will continue. >> that begs the question the what should the end result be? should it be holding those accountable or that there is a system in place helping with the recovery. are you willing to sacrifice the $13 billion and what that could do for as mission or something else. >> it should be both. there is no reason that you can't hold the banks accountable for the wreckage, and hold individuals accountable for these banks. they're going to do it again. if people aren't punished they're going to do it again. >> what are the implications for
other banks? >> it definitely says that the justice department is trying to use this as a template for other cases but we are at this point now five plus years out. it's a little unclear if you're going see huge settlements with other banks down the line, but i think it's definitely something that the justice department is very interested in doing. >> stay with us. time for a short break. when we come back we'll look at what this all means for homeowners. this is inside story. al jazeera america - a new voice in american journalism - >> introduces america tonight. >> in egypt, police fired teargas at supporters of the ... >> a fresh take on the stories that connect to you. [[voiceover]] they risk never returning to the united states. >> grounded. >> real. >> unconventional. [[voiceover]] we spent time with some members of the gangster disciples. >> an escape from the expected. >> i'm a cancer survivor. not only cancer, but brain cancer. america tonight 9 eastern on al jazeera america
and what lies ahead. with us dennis kelleher, jordan estevou, and aruna who reports for reuters. it was announced last year $25 billion designed to help drowning homeowners. jordan, what has the money gone towards? >> $10 billion of those dollars were supposedly set aside for homeowners particularly to help with those who have underwater mortgages, and we were promised at the time. we thought the $26 billion was too little given the fact that there are 12 million people underwater, and that represents in the hundreds of millions of dollars of underwater debt. but you know, it was too small but we thought it was a good start, and we were promised that
1 million people would get relief, 1 million people would be helped. two years later we learned that this has not even come close to helping a million people with their underwater mortgages. a lot of relief has gone to what banks were going to do any way. it's important that future settlements that we really read the fine print, that the details are made public, and there is proper enforcement put in place so if the banks do not follow through, that there is accountability to come for that. >> what about accountability on behalf of homeowners. they're the ones who sign the mortgages and took out the money, dennis kelleher, you're shaking your head now. >> almost all of the underwater mortgage holders today are innocent victims of the housing bubble. they pay every month and they have a home that they call for $1 million that is now worth $500,000 because of homes in the area has foreclosed. we're learning the cascading
record from the housing bubble has left tens of millions of innocent americans paying their bills every month, good, hard working people who are now in financial distress because of this. unfortunately, since this has happened, there has been one program after another to help these people and every one of them has been a business mall failure. better markets is one of the organizations that opposed the settlement because we said that there weren't enough controls and accountability in place. we said it was going to be a fraud on the american people and it has. the question is the department of justice going to learn from that? are they going to make jp morgan $4 billion, a real $4 billion in home relief or not? that's what we need to see. >> how does the a accountabilit. >> the way it was structured, the banks themselves would work with their own borrows, but
there was a monitor to check the banks' work and make sure they were living up to their promises. i'm assuming something comparable would show up in the settlement. >> presumably that home relief is going to go towards the people whose mortgages are serviced by jp morgan chase. but the vast majority of mortgages are controlled by fannie mae and freddie mac, and thus far they have shown no priority toward helping homeowners. we really need leadership at the fhfa to see relief for the millions of homeowners who need it. there is a nominee that's been nominated by the obama administration. mel watt, and they need to put him in place so people can see relief. >> what are we watching for
next? what is the timeline, and what is the probability of jp morgan chase moving forward? >> i think we'll definitely see something in the next week or two. they really want to get this done. i think we'll be looking at what kind of admissions we're going to see from jp morgan and the fine print. >> they've already reserved $23 billion for settlements. the stocks have taken the hit that it is, but the shareholders are a good barometer for a too big to fail bank. as far as the bank keeps making money, the cheerleaders are going to choir them, and it's the tax payers and homeowners who have taken the hit and other people who have a standard of justice from wall street to main treamainstreet. they have taken a hit. >> we'll have to leave it there. thank you for being here. that's it from the team in washington, d.c. and from me, libby casey.
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