JPMorgan accused over $20 BILLION deception

October 1, 2012 11:14 pm

JPMorgan accused over $20bn deception

By Tom Braithwaite and Kara Scannell in New York and Shahien Nasiripour in Washington

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.

JPMorgan accused over $20bn deception - FT.com

Credit Suisse reportedly target of mortgage securities probe

Reuters
4:32 p.m. CDT, October 4, 2012

U.S. federal and state authorities are investigating Credit Suisse AG over mortgage-backed securities packaged and sold by the bank, people familiar with the probe said on Thursday.

The Justice Department and the New York Attorney General are among those probing Credit Suisse's actions, according to the sources, who spoke on condition of anonymity.

A spokesman for Credit Suisse, Switzerland's second-largest bank, declined to comment.

Zurich-based Credit Suisse is the second bank known to be targeted by U.S. authorities probing how banks bundled mortgage loans into securities during the U.S. housing boom.

New York Attorney General Eric Schneiderman filed a civil fraud case against JPMorgan Chase & Co. Monday over mortgage-backed securities originated and sold by Bear Stearns.

The JPMorgan complaint was the first to come out of a working group created by President Barack Obama this year to go after wrongdoing that led to the 2008 financial crisis. JPMorgan, which bought Bear Stearns for $10 a share in March 2008, said in a statement it would contest the allegations.

The nature of the investigation of Credit Suisse was not immediately known. However, private parties have sued the bank, claiming that it misrepresented the quality of mortgages underlying securities it sold.

The Securities and Exchange Commission subpoenaed mortgage-related documents from Credit Suisse, bond insurer MBIA Inc. disclosed in a court filing in May 2011.

The New York attorney general's office declined to comment. The Justice Department did not immediately return calls and emails seeking comment. An SEC spokesman declined comment.

The Residential Mortgage-Backed Securities Working Group was formed to probe the pooling and sale of risky mortgages in the run-up to the 2008 financial crisis.

Obama said he created the group to "hold accountable those who broke the law" and to "help turn the page on an era of recklessness."

Credit Suisse reportedly target of mortgage securities probe - chicagotribune.com