Eideard

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…

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

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.”

Even overdue, it’s nice to see the chickens come home to roost. The sleazy corporatism of Wall Street investment banks – leading up to the Great Recession with the aid of paid flunkeys in Congress and the Bush/Cheney cabal – is rarely challenged. Between the stodgy ennui of American lawyers and the good ol’ boy network of country club politicians, American voters are probably the most under-represented electorate in the educated industrial world.

You pay a helluva price for elitism. It’s about time for a just end to it all.