Where Does JPMorgan’s $13 Billion Go?

They were some of the biggest losers in the 2008 financial crisis: Fannie Mae and Freddie Mac, federal taxpayers, state pension funds, credit unions and, of course, homeowners.

But they saw their fortunes turn somewhat on Tuesday, when ending up on the receiving end of JPMorgan Chase’s record $13 billion settlement. The deal, the largest payout a single company ever made in a government settlement, centered on the bank’s sale of troubled mortgage securities to investors in the run up to the crisis.

Of the $13 billion, the only fine in the case came from federal prosecutors in Sacramento, who extracted a $2 billion penalty. In case you missed their press conference, this was kind of a big deal, representing “the largest recovery ever in a case handled” by the office.

No, prosecutors cannot pocket the cash to purchase a life-size gold statue of Jamie Dimon. Instead, JPMorgan must wire the $2 billion to the Justice Department, which will then deposit the funds into a pot of money at the United States Treasury.

The next chunk of cash, roughly $7 billion, will flow to a range of government authorities, some more obscure than others.

The biggest winner is the Federal Housing Finance Agency, which took control of Fannie Mae and Freddie Mac when the companies collapsed in 2008. JPMorgan agreed to make a “lump sum payment” of $4 billion “payable to Freddie Mac and Fannie Mae, divided between them,” according to the settlement agreement.

The National Credit Union Administration, the federal agency that regulates credit unions, said it will collect a $1.4 billion share of the $7 billion pie “for losses incurred by corporate credit unions as a result of the purchases of the faulty securities.” The payout will allow the agency “to greatly reduce the assessments that all credit unions have to pay.”

The Federal Deposit Insurance Corporation will collect $515 million, which it will distribute to the receiverships for six failed banks, including Colonial Bank, which was at the center of a huge fraud scheme.

State authorities also received a cut, albeit a smaller one, of the $7 billion sum. New York’s Attorney General, Eric T. Schneiderman, will use its $613 million to expand homeowner assistance programs. Lisa Madigan, the Illinois attorney general, will allocate her $101 million to state pension funds that suffered losses from soured mortgage securities, including the Illinois Teachers Retirement System. Attorneys general in California ($299 million), Massachusetts ($34 million) and Delaware ($20 million) also took home a share of the settlement.

That leaves $4 billion in the overall $13 billion deal. The Justice Department, which led negotiations with the bank, earmarked the final sum to help struggling homeowners in hard hit areas like Detroit. Half that sum, or $2 billion, will go toward reducing the balance of mortgages and halting the collection of mortgage payments.

The remaining $2 billion in homeowner relief, according to the Justice Department, will focus on reducing interest rates on existing loans, offering new loans to low-income home buyers and demolishing abandoned homes to curb urban blight.

The total $13 billion payout might seem steep. Of course, it does not include the small fortune JPMorgan spent on the legal services of Sullivan & Cromwell and Debevoise & Plimpton.

AMOUNT WHERE THE MONEY GOES HOW IS WILL BE USED

$7 billion *	State and federal agencies	$4 billion for the Federal Housing Finance Agency goes to Fannie Mae and Freddie Mac. This deal was announced in October.
		$1.4 billion for National Credit Union Association to reduce assessments for credit unions.
		$515 million for Federal Deposit Insurance Corporation
		$613 million to New York attorney general
		$299 million to California attorney general
		$101 million to Illinois attorny general for state pension funds.
		$100 million to New York attorney general for expanding homeowner assistance programs.
		$20 million to Delaware attorney general
		$34 million to Massachusetts attorney general. The office has not decided how to disperse the money.
$4 billion **	Consumer relief	$2 billion credit for JPMorgan to reduce the balance of mortgages in foreclosure-racked areas like Detroit and certain neighborhoods in New York.
		Up to $500 million credit for JPMorgan briefly halting the collection of mortgage payments.
		Credit for JPMorgan to reduce interest rates on existing loans, offer new loans to low-income home buyers and keep those loans on its books.
		Credit for JPMorgan to demolish abandoned homes and other efforts focused on curbing urban blight.
$2 billion	Justice Department	$2 billion fine goes to United States Treasury. Federal prosecutors in Sacramento led an inquiry into JPMorgan’s mortgage practices.
* JPMorgan says this part of the settlement is tax deductable, but that decision may rest with the I.R.S. ** JPMorgan will have to hire an independent monitor to oversee the distribution over four years. Sources: Justice Department, states’ attorneys general