How worried should Wall Street be? When Jamie Dimon announced in early September that JPMorgan Chase & Co. had bolstered its litigation reserves by $9.2 billion to $23 billion, leading the bank to report its first quarterly loss under his watch, the collective intake of breath across Wall Street was sharp. “This is very painful for the company,” chairman, president and CEO Dimon told analysts. Now that JPMorgan appears to be on the cusp of finalizing a mega-settlement with the U.S. Department of Justice, rumored to be in the region of $13 billion, the banking industry is bracing for a wave of litigation expenses that could roll on for years.

The JPMorgan deal follows an $11.6 billion settlement between Bank of America and Fannie Mae earlier this year and a separate $8.5 billion settlement between federal regulators and ten banks, including BofA, over mortgage foreclosures, not to mention a string of smaller fines over everything from municipal bond price rigging to money laundering. Having weathered nearly five years of criticism that they’ve been too soft on Wall Street, the feds are beginning to flex some serious muscle.

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