The New York attorney general’s office has hit JPMorgan Chase & Co. with a civil lawsuit, alleging that investment bank Bear Stearns – prior to its collapse and subsequent sale to JPMorgan in 2008 – perpetrated massive fraud in deals involving billions in residential mortgage-backed securities.

The lawsuit is the first to be filed under the auspices of the RMBS Working Group, which was set up by President Barack Obama to investigate and prosecute alleged misconduct that contributed to the financial crisis…

In the lead-up to the financial crisis, subprime mortgages were sold to people with less-than-ideal credit. Many of them defaulted on their loans when the housing bubble burst and their introductory “teaser” interest rates skyrocketed.

Because many of those mortgages had been sliced and repackaged as securities that could be bought and sold – known as RMBS – the mass defaults led to huge losses at large U.S. banks and other financial firms, helping fuel the global economic meltdown.

New York Attorney General Eric T. Schneiderman is alleging that Bear Stearns led its investors to believe that the loans in its RMBS portfolio had been carefully evaluated and would be continuously monitored. Bear Stearns failed to do either, resulting in investors buying securities backed by mortgages that borrowers couldn’t repay and defaulted on in huge numbers…

The complaint further alleges that even when Bear Stearns executives were made aware of the problems, the firm failed to correct its practices or disclose material information to investors. The executives routinely overlooked negative findings and continued to package the loans into securities for sale to investors…

Investors have so far lost $22.5 billion on more than 100 subprime securities that Bear Stearns issued in 2006 and 2007, according to the complaint. That’s over one-quarter of the original principal balance of $87 billion. The lawsuit seeks injunctive relief, damages and payment of restitution to investors for “fraudulent and deceptive acts.”

Alleged misconduct is the accepted language for Wall Street types and the Party-formerly-known-as-Republican to describe criminal corruption.

  1. NewformatSux says:

    Who can we sue for Fannie Mae and Freddie Mac?
    And why is the Obama Administration promising to pay Lockheed Martin’s legal fees for not notifying employees of coming layoffs?

    • bobbo, the pragmatic existential evangelical anti-theist says:

      I keep thinking you can’t be this stupid, and you keep proving me wrong.

      When am I going to learn??????

      …..but in a close appearing concern: when are the securities rating firms going to be put out of business? I can see showing junk bonds as —CCC and give them a pass but whenever securities are rated AAA+++ the day before they tank, people should go to jail.

  2. msbpodcast says:

    subprime mortgages were sold to people with less-than-ideal credit

    That‘s what made them subprime… Duh

    They were then bundled in to prime securities and that is when the whole mess started

    The bond rating agencies, like Moody’s and Standard & Poors, were to blame for that whole subprime debacle.

    The people at Moody’s and Standard & Poors are the ones who deserve to be fired, from a fuckin’ cannon.

  3. spreeuw says:

    300MM is a joke, they should be hung and so should the parliament and the whitehouse

  4. spreeuw says:

    greetings from NA chat JCD!

  5. Somebody says:

    Wow! Finally, and Hey! Just in time for the election!

    So, how are the MF Global prosecutions coming?

  6. observer says:

    Let’s see if I have this straight. The New York AG waits until the statute of limitations runs out on criminal charges, then files a nice clean civil lawsuit, the result of which will be JPM paying a comparatively small fine (at most), and no individual person or group of people held accountable.

    American justice really is the best that money can buy.

    • Cap'nKangaroo says:

      Let us not forget that the final settlement will include verbiage saying they neither acknowledge the crime nor accept any responsibility. They agree to pay a fine “just to get this behind us”.

      • orchidcup says:


        To both of you.

        Nobody goes to prison (Club Fed) because nobody was responsible for the crime.

        Corporate Personhood is sublimely effective in shielding criminals from prosecution.

  7. Mextli: ABO says:

    Let’s get to the root of the matter. What started the subprime mortgage trend?

    • msbpodcast says:

      I said that already: The bond rating agencies, like Moody’s and Standard & Poors, were to blame for that whole subprime debacle..

      If the bonds had been rated at their proper value, they would have been a whole lot less attractive and have not sold in the volumes they did in the volumes that they did.

  8. NewformatSux says:

    Arguably, the New York AG ES got us into the trouble in the first place. Eliot Spitzer loved to sue Wall Street firms to get big headlines, even with weak cases. He went after the head of AIG causing him to be semi-retired and the firm fled to New Jersey. Had he been fully in charge, they would not have been underwriting all those loans, and the problem does not get nearly as bad without AIG insuring your losses.

    • msbpodcast says:

      AIG was underwriting credit-default swaps, not merely bundled subprime loans. (Moody’s and Standard & Poors had been responsible for magically white washing the bundles from junk to A+++, when a prior A+++ should have been downgraded as a result of taking on the junk.)

      The problem was that AIG employed people who didn’t understand that a financial instrument that acted as a multiplier when times were good leading to the multiplication of the investment acted in reverse when the economic indicators went south, and suddenly AIG was faced with covering the plunges in the market. (One of the condo board members here is a well placed AIG employee.)

      If AIG had not been greedy and not tried to cover losses beyond the original investment, (but the fees were so enticing,) they would not have been on the hook for 1.1 trillion bucks. (That’s right 1.1 trillion. Bet you never saw that in your nightly news.)

      They were trying to make good on the entire amount, (since salesmen [at that level the players are almost all men] at AIG figured that it was free fees for them,) instead of only the original investment, when the sign of the multiplier went from positive(+) to negative(-) and AIG went from having to eat a little loss to trying to eat the whole multiplied loss.

      • NewformatSux says:

        Exactly, and the forced out chairman would not have gone there to that level.

  9. NewformatSux says:

    Obama has placed taxpayers on the hook by telling defense contractors they will pay for any judgment against them when workers sue them for not notifying them of layoffs.

    • Dallas says:

      Good point

      • I'm ugly and my mother dresses me funny says:

        you didn’t get that round mouth from eating square meals, did you?

        • Noname says:

          pedro decided to play the copy nick trick. Oh the horror of it!

          pedro, always following your crush around.

          Ran out of hand lotion to relieve your Sap buildup?

  10. Uncle Patso says:

    The venality, corruption and rapaciousness of the financial industry (especially in the anti-regulation U.S.) have few equals in all of human history. Arguably, the Nazi “Final Solution” was more evil and killed more people, but the huge real estate financial black holes that pop up in the U.S. every 30 years or so (remember the Savings & Loan scandal from the Reagan era?) have pauperized as many millions as A. H. and his minions killed.

    • stormtrooper 651 says:

      You got this around the wrong way pal, FIRST the govt bankrupts the economy with bubbles of “free” houses, education, and healthcare schemes, THEN comes the hyperinflation, THEN comes the genocidal meltdown.

  11. stormtrooper 651 says:

    ooh, another scapegoat, and just in time for the election.

  12. Pitmaster Dave says:

    Mmmm, those necktied piggies gonna make some GOOD eatin’ when the big collapse comes. The secret’s to not skinning them first, though. Coat ’em thick with red clay and pit-bake ’em. When you finally pull ’em and crack that clay, the skin and the hair comes right off and, MAN, it just don’t GET no juicier.

  13. Mark says:

    How do I unsuscribe from this blog?


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