The $13 billion settlement that J.P. Morgan Chase is working out with the Obama administration is complicated. But it’s something that even those of us who don’t have MBAs should try to understand.

In an editorial headlined “The Morgan Shakedown,” the Wall Street Journal this morning calls the settlement “a watershed moment in American capitalism.” First of all, $13 billion is roughly half Morgan’s annual earnings—and it’s going into the coffers of the federal government.

Most of the settlement is connected to the fiasco with mortgage-backed securities issued before the 2008 financial panic. Morgan, however, wasn’t the only institution that issued this product. Bear Stearns and Washington Mutual issued more of these securities than Morgan. The feds asked Morgan to take over these companies as a way to lessen the effects of the panic.  

Morgan didn’t have time to do due diligence, but its CEO Jamie Dimon agreed to help out with the crisis. The upshot is that now the feds are punishing Morgan for having stepped in, at the request of the government, to do something that helped the U.S. Treasury. Four billion of the settlement will go to handle charges against Fannie Mae, which is far more culpable than Morgan in the financial meltdown.

Another $4 billion is designated for consumer relief. Most of these products were bought by large institutional investors. The Wall Street Journal rejects the charges against Morgan, but, even if they are correct, the editorial points out that it is the lucky feds who will distribute this largess. Herein lies a problem:

To make the victims whole, the government would have to distribute the settlement proceeds to those buyers, who aren't mom and pop. If instead the feds pass out the money to consumers or their favorite advocacy groups, the fact that this is a political shakedown and wealth-redistribution scheme becomes even clearer. Perhaps the Administration will have the checks arrive in swing Congressional districts right before the 2014 election.

Perhaps even more disturbing, this settlement shows how powerful government has become vis a vis business. Despite the mythology of the left, the recession wasn’t caused by bankers. It was caused more by consumers who bought things they could not afford. But the left wants heads and it will get them.

We’d like to see Mr. Dimon fight the charges, but the political reality is that he and his bank don't have much choice. His board is eager to move on, and the government will only turn the screws harder if he resists. In a post Dodd-Frank world, banks are public utilities and no CEO can afford to resist the government's demands.

The real lesson of the Morgan settlement isn't that justice has finally been done to the perpetrators of the crisis. That would require arresting Barney Frank and those in Congress who blocked the reform of Fannie and Freddie, plus the Federal Reserve governors who created so much easy credit.

The lesson is how government has used the crisis to exert political control over even the most powerful private financial companies. The real lords of American finance are Attorney General Eric Holder, Treasury chief Jack Lew and their boss in the White House.

This is a landmark moment in American capitalism.