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JPMorgan's $13 Billion Settlement With the Fed Doesn't Mean Its Woes Are Over (Correct)

(Corrects article to say the settlement was with the federal government, not the Federal Reserve.)

NEW YORK (TheStreet) -- At one time, there was much speculation that Jamie Dimon, chairman and CEO of JPMorgan Chase (JPM - Get Report), would be heading to Pennsylvania Avenue to become the Secretary of Treasury. While that did not transpire, it turns out that JP Morgan will still be making a significant contribution to the United States Treasury as it has agreed to pay a $13 billion fine due to illegal practices in the mortgage industry. The record fine only settles the civil charges according to one source, as the federal government retains the right to pursue criminal charges.

The settlement with the federal government follows a $4.5 billion deal that JPMorgan reached last Friday with 21 institutional investors for related matters. That, too, resulted from mortgage deals -- many of which came from the JPMorgan acquisition of Bear Stearns and Washington Mutual financial institutions -- that collapsed as a result of the Great Recession.

At the urging of the federal government, JPMorgan bought Bear Stearns in March 2008 and Washington Mutual in September 2008. At that time, many thought JPMorgan had purchased a tremendously undervalued asset due to the value of the prime brokerage unit of Bear Stearns, along with its signature headquarters building -- a piece of prime Manhattan commercial real estate.

The Great Recession, plus the devastation it inflicted upon the housing market, has resulted in an aftermath that will be costing the financial sector billions in fines. For the shareholders, the impact is already being felt on the bottom line. For the first time with Dimon at the helm, JP Morgan blamed last quarter's loss, of more than $9 billon, on legal expenses.

Must Read: TheStreet Signs Jim Cramer to 4-Year Contract

That will not be the last time shareholders of a financial institution will suffer from its transgressions over the course of the Great Recession.

Bank of America (BAC - Get Report), as with JPMorgan, is looking at significant costs due to its buying Countrywide Credit. Recently, BofA lost a significant court case that resulted in it being liable for toxic mortgage backed securities that were issued by Countrywide before it was purchased. According to reports, the Federal Housing Finance Agency wants to fine BofA more than $6 billion. That could be even more bad news for others, such as Wells Fargo (WFC).

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