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NY sues JP Morgan

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posted on Oct, 1 2012 @ 09:41 PM

New York Attorney General Eric Schneiderman filed a civil fraud lawsuit against JPMorgan Chase & Co (JPM.N) on Monday over mortgage-backed securities packaged and sold by Bear Stearns.

It was the first action to come out of a working group created by President Barack Obama earlier this year to go after wrongdoing that led to the financial crisis.

JPMorgan, which bought Bear Stearns for $10 a share in March 2008, said in a statement it would contest the allegations. The suit accuses Bear Stearns of failing to ensure the quality of loans underlying residential mortgage-backed securities it packaged and sold in 2006 and 2007. Investors lost more than $22.5 billion on more than 100 of those securities, or one-quarter of their original value, the lawsuit said.

I'm surprised this suit is being carried out by NYS instead of the US Department of Justice, the FDIC, or one of the other federal financial policing agencies. I'm no expert on jurisdiction, but it's probably fair to say that people all over the country were effected by the actions of Chase/Bear Stearns.

The suit was initiated by a DOJ task force, the Residential Mortgage Backed Securities working group.

The RMBS Working Group is a collaborative effort led by five co-chairs including Assistant Attorney General for the Criminal Division Lanny Breuer, Acting Assistant Attorney General for the Civil Division Stuart Delery, U.S. Attorney for the District of Colorado John Walsh, Director of Enforcement for the U.S. Securities and Exchange Commission (SEC) Robert Khuzami, and New York State Attorney General Eric Schneiderman. The working group and its members are focused on investigating potential false or misleading statements, deception or other misconduct by market participants in the creation, packaging and sale of mortgage-backed securities.

I'm just starting to read into this now. Trying to find info on how much money they are seeking in the suit, and where the winnings would go if the case is successful.

Any insight and discussion would be appreciated. A lot of branch topics for this, especially the role of government in regulating the financial industry.

edit on 10/1/2012 by PatrickGarrow17 because: (no reason given)

edit on 10/1/2012 by PatrickGarrow17 because: (no reason given)

posted on Oct, 1 2012 @ 10:28 PM
From what I've seen, the role of government in regulating the financial industry consists of taking them to court on BS like this and winning a few paltry dollars. Which dollars are presumably then thrown into the black hole that constitutes the servicing of the national debt--which is in turn controlled by the very people who are being sued and fined.

The few paltry dollars represent less than pocket lint to those who have to pay it out, so it's of little consequence as far as making them modify their behavior.

For the life of me, I can't figure out how I developed this deep cynicism....

posted on Oct, 1 2012 @ 10:29 PM
reply to post by Ex_CT2

So would you rather see an increase in regulation from a preventative standpoint?

Or are you saying the government is basically incompetent and should stay out all together?

posted on Oct, 1 2012 @ 10:54 PM
reply to post by PatrickGarrow17

I'm not saying the government is incompetent in this particular way. I'm just saying that they've developed a win-win-win model. The government wins--a few dollars and the illusion that they're doing something. The corporations win--they drop a little change and go on with their criminal enterprise as usual. The public wins--they see this going on and have no idea of what goes on behind the scenes, and think that the government is looking out for their interests.

It's a game of pocket-change. No behaviors are changed; no one suffers; everybody feels good about the results. It means squat and can go on indefinitely. Look at the past. Anyone ever appeal? Anything ever change? Anyone ever complain about the outcome?

Edit to add: No, I don't think regulations will ever be written that make a whit of difference. It's not a matter of regulations. The laws have no teeth. Or, more accurately, no one enforces the laws AS IF they had any teeth. Criminal behaviors of this depth and depravity should result in people going to jail. What the hell is the point in fining criminals who make more money in a week than they will ever have to pay out for their crimes? I see no indication that it will ever change anything....

edit on 10/1/2012 by Ex_CT2 because: (no reason given)

posted on Oct, 1 2012 @ 10:59 PM
Hrm... has the NY State AG figured out a way to get even more stimulus money - and in a way that won't let the taxpayers have any insight or input into where it goes or how it's used?

We started this entire farce with basically a game of three card Monte - with the taxpayer as the mark. Now it's like a game of eight card Monte and don't even realize that we're still playing it.

I'd Google who the NY AG is but I'm afraid that I'd find out he's a former Bear Stearns legal exec.


posted on Oct, 1 2012 @ 11:15 PM
reply to post by Hefficide

Yeah, I'm trying to figure out where the money would go if the suit wins, seems vague right now. Probably would go to those who lost out in '08 in a fair world. That's why it seems odd to me that it's being carried out by NYS when people nationwide were affected.

About the AG Eric Schneiderman:

The Attorney General previously spent 15 years in private practice as an attorney, and later as a partner, at the firm of Kirkpatrick and Lockhart, where he handled complex litigation.

About Kirkpatrick and Lockhart, which merged recently into K&L Gates:

The company has been described as "a lobbying firm that represents the hi-tech and energy sectors" and in the past has hired former legislators favorably inclined towards their clients.

It is ranked as the 8th largest law firm in the United States by the National Law Journal[4] and as the 11th largest among law firms worldwide by The American Lawyer

So not quite a financial lawyer, but a lobbying firm might be even worse

Although, if I'm going to have a lobbying lawyer as the AG one for high tech and energy isn't the worst.

And not sure if this is quite like bailout/stimulus, because money would be coming from JP and not taxpayers. But, if the suit loses then we will have wasted a bunch of tax money indeed.

Edit: this site: lists JP as the top bank in the US by total assets with over 2.2 trillion$.

I'm not sure exactly how much the lawsuit is seeking, the number cited for misleading securities is 22.5 billion. That would hardly put a dent in the bank's status as one of the biggest in the world.

edit on 10/1/2012 by PatrickGarrow17 because: (no reason given)

edit on 10/1/2012 by PatrickGarrow17 because: (no reason given)

posted on Oct, 1 2012 @ 11:34 PM
Just thought of an interesting contradiction in this case.

In 2008, JP's acquisition of Bear Stearns was largely facilitated by the government.

Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed -- after prodding by the federal government -- to be sold to J.P. Morgan Chase for the fire-sale price of $2 a share in stock, or about $236 million. Bear Stearns had a stock-market value of about $3.5 billion as of Friday -- and was worth $20 billion in January 2007.
From WSJ 3/17/2008

And now, JP is being sued by the same government for the actions of Bear Stearns, for whom they are now legally responsible.

All in all, even if JP loses this case, it will probably end up being a good deal for them. Them buying Bear Stearns at 2$ a share is something like buying a bar of gold for 5$ that used to belong to a serial killer and noone else wants to touch.
edit on 10/1/2012 by PatrickGarrow17 because: (no reason given)

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