Tuesday, October 2, 2012

N.Y. AG sues J.P. Morgan over mortgage securities

Ronald D. Orol

WASHINGTON (MarketWatch) — New York Attorney General Eric Schneiderman late Monday filed a lawsuit against J.P. Morgan Chase & Co. in civil court, alleging widespread fraud in the sale of mortgage-backed securities.
The suit relates to mortgage-backed securities issued by Bear Stearns & Co., which was acquired by J.P. Morgan JPM +1.21%  in 2008 when the firm collapsed amidst the financial crisis.
The complaint argues that Bear Stearns defrauded “thousands of investors.”
The charges, which came partly as a result of a federal mortgage task force formed in January by the Justice Department, assert that the misconduct was in connection with the firm’s “due diligence and quality control processes” that “constituted a systemic fraud on thousands of investors.”

The complaint alleges that Bear Stearns and its mortgage unit “committed multiple fraudulent and deceptive acts” in promoting and selling residential mortgage-backed securities. It alleges that the bank “systematically failed to fully evaluate the loans” while leading investors to believe that the securities have been “carefully evaluated.”
Dennis Kelleher, president of advocacy group Better Markets, said in a statement that he hopes the lawsuit is the first of many and that lawbreakers on Wall Street will be punished.
“Finally! A major Wall Street bank has been sued for fraud for its reckless lending that helped cause the 2008 financial collapse,” Kelleher said in a statement. “Wall Street is a high crime area, but no one has been held accountable. The creation, sale and distribution of worthless toxic mortgages was at the core of the financial crisis.”

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