THE $13 billion JPMorgan Chase settlement is a step forward on the banking giant’s long road to redemption. It sends a strong signal to Wall Street that the federal government will punish wrongdoing that harms the public.

This case was about JPMorgan’s role in packaging, selling and issuing toxic residential mortgage-backed securities. The bundling was at the heart of the financial collapse of 2008. Large investors, including state pension systems, suffered huge losses.

JPMorgan’s settlement covers responsibility for questionable mortgage practices by two financial institutions it acquired, Bear Sterns and Seattle-based Washington Mutual. Investors who lost big at the hands of the three financial institutions will receive more than $6 billion from the settlement. About $4 billion is targeted for consumer relief for homeowners whose mortgages are handled by JPMorgan. Another chunk will help neighborhoods blighted by rundown and abandoned homes.

Credit Washington state’s investment board for avoiding the toxic securities. Other state pension systems did not and some, for example in Illinois, suffered huge losses.

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The settlement largely fits the transgressions. It is the largest amount paid by a single corporation to the federal government, and nearly triple the $4.5 billion in penalties levied against BP in response to the 2010 Gulf of Mexico oil spill. To put the $13 billion settlement in perspective, JPMorgan made a $21.3 billion profit in 2012.

The settlement follows relief earlier this year for Washington homeowners. Five banks, including JPMorgan, covered under the National Mortgage Settlement have reported more than $1.2 billion dollars in consumer relief for Washington homeowners. An estimated 16,377 Washington state borrowers received an average of $74,763 in consumer relief, according to Washington state Attorney General Bob Ferguson.

An appropriately tough settlement resolves the civil cases brought by state and federal investigators. But JPMorgan still faces a federal criminal inquiry in California. The settlement also does not preclude the possibility of future civil and criminal charges against individuals nor criminal charges against the bank.