First Government Lawsuit Filed against Major Bank for Institution-Wide Fraud

Wednesday, October 03, 2012

JPMorgan Chase has become the first major bank to be accused of institution-wide fraud stemming from the sale of mortgage-backed securities that helped fuel the 2008 meltdown on Wall Street.


The fraud accusation is contained in a lawsuit filed in the New York State Supreme Court by the state’s attorney general, Eric Schneiderman, who is also co-chairman of a task force created by the U.S. Justice Department, known as the Residential Mortgage-Backed Securities Working Group.


The suit was filed against Bear Stearns and one of its subsidiaries, both of which are now owned by JPMorgan. The government alleges widespread misconduct in the packaging and sale of mortgage securities during the housing boom, including lying to investors about the quality of the loans sold and pressuring underwriters to produce as many mortgage loans as possible regardless of their quality.


The allegations echo those found in other lawsuits currently being pursued against Bear Stearns and JPMorgan by private parties, including other banks seeking to recover losses in mortgage-securities deals brokered by the defendants.


One example is Dexia, a Belgian-French bank, which is suing JPMorgan to get back $1.6 billion it lost in deals with Bear Stearns and Washington Mutual, another institution taken over by JPMorgan during the financial crisis.


Altogether, the government claims investors lost $22.5 billion as a result of low-quality mortgages sold by entities now controlled by JPMorgan. The suit does not ask for a specific amount, but rather calls on JPMorgan to turn over all the profits it made as a result of fraud and to pay restitution to investors. Homeowners who were sucked into the deals with get nothing.

-Noel Brinkerhoff, David Wallechinsky


To Learn More:

JPMorgan Unit Is Sued Over Mortgage Securities Pools (by Gretchen Morgenson, New York Times)

Suit Against JPMorgan Alleges Widespread Mortgage Fraud At Bear Stearns (by Brady Dennis and Sari Horwitz, Washington Post)

JP Morgan’s Sub-prime Horror (by Robert Peston, BBC News)

New York State v. J.P. Morgan Securities (New York Supreme Court) (pdf)

Obama Administration Threatens to Pull Plug on JPMorgan Trading in Energy Market (by Ken Broder, AllGov)

Welfare for the Rich: U.S. Gives JPMorgan $14 Billion a Year in Subsidies (by Noel Brinkerhoff and David Wallechinsky, AllGov)

The Obama Mortgage Settlement is Just Another Bank Bailout in Disguise (by David Wallechinsky, AllGov)

New York Sues 3 Major Banks over Mortgage Fraud (by Matt Bewig, AllGov)


Mimo 11 years ago
Wall Street Banks own America, all 350 million of us. The path to feedrom is to let them fail, every single one of them. Walk away from the debt and they will crumble, and we will have to learn to fend for ourselves for a while. This problem was created because we elected thieves to govern us. The only way to rid ourselves of these leeches is to make sure that these rats go down with the ship, and then build a new ship that is rat free (and then fumigate regularly)This is going to happen anyway over the next several years, it will just be slower and the rats will escape and we will be forced to hunt them down. Oh my what to do, what to do. Take the hit now, grit the teeth and take our medicine, or sink ever so slowly with the rats?Personally, I think we should pour gas and set fire to the whole stinking garbage barge, and then we need to be on the beach with shovels as they try to crawl out of the water and smack the little banker rats on their evil widdle heads.

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