JP Morgan’s $13B Settlement Benefits State Pensions

State pension funds across the country are benefitting from the $13 billion record settlement with JP Morgan, which culminated a national effort regarding the investment bank's “packaging, marketing, sale and issuance” of toxic mortgages.

According to the settlement agreement, the Department of Justice (DOJ) said Tuesday that the New York-based financial institution agreed to the “largest settlement with a single entity in American history.” JP Morgan also “acknowledged [through the agreement that] it made serious misrepresentations to the public” about its residential mortgage-backed securities (RMBS) dealings.

The $13 billion agreement will prove to help harmed investors and “provide much needed relief to underwater homeowners and potential homebuyers, including those in distressed areas of the country,” the DOJ said Nov. 19.

While $4 billion will be offered to aid consumers, approximately $9 billion will be diverted to settle federal and civil claims. The state settlement amounts include $298.9 million to California, $19.7 million to Delaware, $100 million to Illinois, $613 million to New York and $34.4 million will be given to the Commonwealth of Massachusetts.

Within California, the nation’s two largest retirement systems said Tuesday that they were on the list for receiving a sliver of JP Morgan’s settlement. The $277.8 billion California Public Employees’ Retirement System (CalPERS) will receive $261 million and the $176 billion California State Teachers’ Retirement System (CALSTRS) is expected to attain $19.5 million plus interest from the investment bank.

“JP Morgan Chase profited by giving California’s pension funds incomplete information about mortgage investments,” California Attorney General Kamala Harris said. “This settlement returns the money to California’s pension funds that JP Morgan wrongfully took from them.”

Also, Illinois Attorney General Lisa Madigan said that $100 million will be deposited into the state’s pension systems’ portfolio.

According to the breakdown, JPMorgan will pay $72.4 million to the Illinois Teachers Retirement System (TRS), $16.2 million to the State Universities Retirement System (SURS) and $11.4 million to the Illinois State Board of Investment (ISBI). The ISBI manages assets for Illinois’ State Employees’ Retirement System, General Assembly Retirement System and Judges’ Retirement System.

“We are still cleaning up the mess that Wall Street made with its reckless investment schemes and fraudulent conduct,” Madigan said in her statement.

Additionally, the $54.4 billion Massachusetts Pension Reserves Investment Trust (PRIT), managed by Massachusetts Pension Reserves Investment Management Board (PRIM), “anticipates receiving relief/compensations from this settlement,” confirmed Jon Carlisle, communications director for Treasurer Steven Grossman.

Carlisle explained in an email Wednesday that exact details have not been determined.  

Moreover, a Delaware Department of Justice spokesperson disclosed that approximately $7.6 million will go to public pension funds and government accounts. This includes the $8.1 billion Delaware Public Employees' Retirement System (DPERS).

In the Empire State, a spokesperson for New York State Comptroller Thomas DiNapoli, sole trustee for the $160.4 billion Common Retirement Fund (CRF), noted that the retirement fund is not receiving any monies from the settlement.

It was unclear if New York’s $95.1 billion State Teachers’ Retirement System (NYSTRS) will receive relief funds from the landmark JP Morgan settlement as inquiries sent to NYSTRS were not immediately returned.

The DOJ states that the settlement resolves only civil claims linked to the RMBS sales of JP Morgan, Bear Stearns and Washington Mutual. However, additional individual civil and criminal charges are possible in relation to the toxic mortgage claims, federal official list.