The tentative deal does not release the bank from criminal liability for some of the mortgages it packaged into bonds and sold to investors, a factor that had been a major sticking point in the discussions, the source said.
Reuters reported another source close to the discussions characterized a deal as likely, but cautioned that parts of the agreement are still being hammered out, and the settlement could conceivably fall apart.
As part of the deal, the bank will likely cooperate in criminal inquiries into certain individuals involved in the conduct at issue, the source, who declined to be identified, said.
Officials at JPMorgan Chase and the Justice Department declined to comment.
The record settlement could help resolve many of the legal troubles the New York bank is facing. Earlier this month JPMorgan Chase disclosed it had stockpiled $23 billion in reserves for settlements and other legal expenses to help cover the myriad investigations into its conduct before and after the financial crisis.
The deal is being hammered out by some of the most senior officials at the Department of Justice and the largest U.S. bank. Attorney General Eric Holder and JPMorgan Chase Chief Executive Jamie Dimon spoke on the phone on Friday night to finalize the broad outlines of the broad deal, the first source said.
Long considered one of the best-managed banks, JPMorgan has stumbled in recent years, with run-ins with multiple federal regulators as well as authorities in several states and foreign countries over issues ranging from multibillion-dollar trading losses and poor risk controls to probes into whether it manipulated a power market.
Some of the problems relate to mortgage bank Washington Mutual and investment bank Bear Stearns, two failing firms that JPMorgan took over in 2008.
The bank and the Justice Department have been discussing a broad deal that would resolve not only the inquiry into mortgage bonds it sold to investors between 2005 to 2007 that were backed by subprime and other risky residential mortgages, but also similar lawsuits from the Federal Housing Finance Agency, the National Credit Union Administration, the state of New York and others.
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