The Great Recession still haunts California, as became evident once more earlier this week when the U.S. Justice Department announced its $13 billion settlement with JPMorgan Chase for its role in the housing meltdown.
The size and scope of the settlement is impressive, thanks in no small part to the investigation by the U.S. attorney's office in Sacramento.
It is the federal government's largest civil settlement, eclipsing the $4 billion paid by BP after the Gulf of Mexico oil spill in 2010. It amounts to half of JPMorgan's profit in 2012.
JPMorgan, the nation's largest bank, admitted that it failed to fully detail the risks of the mortgage-backed securities to investors and agreed to cooperate in a criminal investigation, also being carried out by the office headed by U.S. Attorney Benjamin Wagner in Sacramento.
All that is fitting, given the havoc caused by banks during the crisis, especially in the Central Valley. But the housing bubble burst more than five years ago. President Barack Obama took office trying to get along with the banks. The effect was to delay and thus deny justice for years.
People at the top, JPMorgan executives among them, are doing well. Indeed, the settlement was announced a few days after Obama's first treasury secretary, Timothy Geithner, who formulated much of Obama's response to the financial crisis, went through the revolving door and took a job as president of Warburg Pincus LLC, the New York-based private equity firm.
Obama's fundamental campaign pledge was that he would help everyday Americans. For much of the state and nation, the recovery is far too slow in coming. California's unemployment rate remains above 11% and there is 12% unemployment in Central Valley counties. This is unacceptable.
The U.S. attorney's office in Sacramento started working on the case last year. That's not the Eastern District's fault. The main Justice Department decided to establish a task force and in late 2011 embark on a fuller investigation of the factors that led to the meltdown.
Among the investors in the JPMorgan securities were California pension funds. As part of the $13 billion settlement, CalPERS will recover $261 million, and the California State Teachers' Retirement System will receive $19.5 million, said to be the full sum they invested in JPMorgan's securities.
JPMorgan promises to spend the equivalent of $4 billion to help still-struggling homeowners, although it's not clear how much of that money will be spent in California.
JPMorgan's stock sits near its 52-week high, a tribute to the certainty brought about by the settlement. As much as $7 billion of the settlement will be tax deductible. Despite the record settlement, the bank will survive and flourish.