In 2008, the United States witnessed its worst financial catastrophe since the Great Depression. The collapse of the economy here in the United States not only led to housing market woes and consumer losses in the stock market, but also to the fall of several large financial institutions, the bailout of national banks, and even a downturn in European markets. The United States is still attempting to recover from the recession caused by the 2008 financial crisis. Progress toward justice was made today, however, with the Justice Department reaching a $13 billion settlement with JP Morgan, the banking institution who was the main culprit behind the Global Financial Crisis.

JP Morgan created the explosion in the housing market in 2008 by selling unstable mortgages as security investments without disclosing the risks that investors were taking with such purchases. Whenever home-owners were forced to default on these mortgages due to inability to repay the loans, investors lost billions of dollars and thus the economy was devastated: “Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown. JPMorgan 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,” Attorney General Eric Holder stated in a release from the Justice Department.

The $13 billion dollar figure marks the largest settlement ever reached between the US Justice Department and a single corporation, almost tripling the $4.5 billion amount BP had to pay for its Gulf oil disaster.

Of the $13 billion, $9 billion is committed toward repaying losses incurred by federal and state agencies due to the financial disaster and will be doled out as such:

– $2 billion as a penalty to the Justice Department
– $1.4 billion to the National Credit Union Association
– $515.4 million to the FDIC
– $4 billion to the Federal Housing Finance Agency
– $298.9 million to California; $19.7 million to Delaware; $100 million to Illinois; $34.4 million to Massachusetts; and $613.8 million to New York

The remaining $4 billion is reserved to help the individual homeowners who were affected by the housing-market collapse. The grand majority of the $4 billion will go toward helping individuals pay the principals on their loans from JP Morgan. Over the next 4 years, JP Morgan will also suspend collection on certain mortgage payments to ensure that homeowners are able to keep their houses.

The remaining amount from the $4 billion going to individuals will be used to reduce interest on loans and make mortgages available to the general public once again, with the caveat that these loans cannot be sold to investors, as well as toward a program which will reduce blight in urban areas by demolishing homes which have been foreclosed and are now vacant.

Of the $13 billion settlement, the Justice Department reserved a total of $7 billion to aid investors in recovering from their losses incurred by buying the residential mortgage-backed securities (RMBS’s).

This settlement finally brings some resolve to the hugely detrimental impact created by the illegal sales committed by JP Morgan, and also showcases that the federal government is willing to act against large national businesses and banks whenever they break the law. The Obama administration had lost much ethos since 2008 due to their bail-outs and lack of prosecution. While the victory against JP Morgan displays the fact that the government is willing to pursue legal actions against corporations to an end-point, it may have come too late. The United States still faces an unemployment rate hovering around 8%, and the most recent Consumer Confidence Index reflected a 9 point down-turn, even with the approaching holiday season. If the federal government wants to regain the confidence of the buyer, it will have to do even more.

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