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Piggybankblog posted on 10/01/12
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Cross liked with FT.COM
The New York attorney-general sued JPMorgan Chase on Monday over the alleged deception of investors who lost more than $20bn on mortgage-backed securities created by Bear Stearns.
The complaint is part of a last push from state and federal authorities to uncover evidence of wrongdoing by banks in the run-up to the financial crisis. It follows the creation of a president’s working group into mortgage fraud, widely seen as an attempt to file big cases before the presidential election in November.
The office of Eric Schneiderman, the New York attorney-general, said he would pursue similar claims against other banks.
JPMorgan acquired Bear Stearns in 2008 in a rescue acquisition backed by federal regulators. The bank said on Monday that acquisition was made “over the course of a weekend at the behest of the US government” and noted the complaint was “entirely about historic conduct” of Bear Stearns.
The attorney-general accused Bear of having “systematically failed to evaluate the loans” that were packaged into mortgage-backed securities, leading to the inclusion of mortgages on which borrowers were likely to default, and later did, causing investor losses of more than $20bn. The suit seeks the handover of profits made on the MBS.
JPMorgan said it would “contest these allegations”. In critical comments, the bank said it was “disappointed” that it had not been given the “opportunity to rebut the claims”, which it said were made “relying on recycled claims already made by private plaintiffs”.
The lawsuit comes as the Securities and Exchange Commission and Department of Justice are also investigating the big banks for their underwriting practices. In February, JPMorgan, Goldman Sachs and Wells Fargo disclosed they had received “Wells notices” from the SEC alerting them that the agency might file civil charges against the bank for failing to tell investors certain information about the quality of the loans, delinquency rates and early payment defaults. The SEC was not part of Monday’s action.
Mr Schneiderman’s office said “We intend to follow up with similar actions against other sponsors and underwriters.” People familiar with the investigations say they expect lawsuits to be filed against other banks. In recent weeks some of the banks have held settlement talks with regulators, these people said, although it was unclear whether deals would be reached.
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My name is John Wright AND I AM FIGHTING BACK!
All Rise! The Honorable Judge Wright has left The Courtroom of Public Opinion!
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