Lawmakers Demand More Transparency In Settlements - MoneyBeat - WSJ

Lawmakers Demand More Transparency In Settlements - MoneyBeat - WSJ

Calling government claims about the value of legal settlements with financial firms “misleading,” two lawmakers on Wednesday introduced legislation to require public disclosure of more information on the terms of these agreements.
Sen. Elizabeth Warren (D., Mass.) and Sen. Tom Coburn (R., Okla.) said tax deductions and other terms often make settlements less significant than officials typically tout.
Their legislation – dubbed the “Truth in Settlements Act” — would require copies of settlements above $1 million to be posted on federal agency websites – something agencies typically do already. Any written statements by the government mentioning the dollar value of these settlements would have to include how they are categorized for tax purposes and whether they could be offset with credits for good conduct.
Concern about settlements arose last fall when J.P. Morgan ChaseJPM +0.70% & Co. reached a $13 billion settlement with the government over soured mortgage securities the bank sold before the financial crisis. Much of that settlement was tax-deductible, meaning J.P. Morgan could effectively pay billions of dollars less than $13 billion.
However, a separate $1.7 billion settlement announced this week over J.P. Morgan’s liability in Bernard Madoff’s fraud scheme is not tax deductible. As part of its settlement agreement with the Justice Department, J.P. Morgan agreed that it wouldn’t deduct its $1.7 billion payment.