JP MORGAN CHASE: FIRST GOVERNMENT LAWSUIT FILED

JP MORGAN CHASE: FIRST GOVERNMENT LAWSUIT FILED AGAINST MAJOR BANK FOR INSTITUTION-WIDE FRAUD

http://worldtruth.tv/jp-morgan-chase-first-government-lawsuit-filed-against-major-bank-for-institution-wide-fraud/

JP Morgan 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 Stearn’s and one of its subsidiaries, both of which are now owned by JP Morgan  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 Stearn’s and JP Morgan 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 JP Morgan to get back $1.6 billion it lost in deals with Bear Stearn’s and Washington Mutual, another institution taken over by JP Morgan 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 JP Morgan  The suit does not ask for a specific amount, but rather calls on JP Morgan 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.

The complaint contends that Bear Stearn’s and its lending unit, EMC Mortgage, defrauded investors who purchased mortgage securities packaged by the companies from 2005 through 2007.

The firms made material misrepresentations about the quality of the loans in the securities, the lawsuit said, and ignored evidence of broad defects among the loans that they pooled and sold to investors.

Moreover, when Bear Stearn’s identified problematic loans that it had agreed to purchase from a lender, it was required to make the originator buy them back. But Bear Stearn’s demanded cash payments from the lenders and kept the money, rather than passing it on to investors, the suit contends.

Unlike many of the other mortgage crisis cases brought by regulators such as the Securities and Exchange Commission, the task force’s action does not focus on a particular deal that harmed investors or an individual who was central to a specific transaction. Rather, the suit contends that the improper practices were institution wide and affected numerous deals during the period.

Source: http://www.allgov.com/