Another day, another suit against banks for the sins of the pre-crisis era. The suit brought by New York State Attorney General Eric T. Schneiderman Oct. 1 against the former Bear Stearns & Co., now a unit of JPMorgan Chase, alleges Bear Stearns defrauded mortgage investors during the subprime boom times that preceded the investment bank’s near collapse. It was ultimately rescued by JP Morgan’s government-financed acquisition. It’s easy to get lost in the weeds on the legal action that has trickled out in the four years since the crisis hit. But here are a few details that make the Schneiderman case stand out:
- “Unlike many of the other mortgage crisis cases brought by regulators such as the Securities and Exchange Commission, the task force’s action does not focus on a particular deal that harmed investors or an individual who was central to a specific transaction. Rather, the suit contends that the improper practices were institutionwide and affected numerous deals during the period,” the New York Times reports.
- “The complaint follows the creation of a presidential working group into mortgage fraud, widely seen as an attempt to file big cases before the US elections in November,” the Financial Times reports.
- “The lawsuit also uses New York State’s Martin Act, which doesn’t require prosecutors to prove a firm intended to defraud investors to win a case,” the Wall Street Journal reports. (paid)
Like many of the recent cases proceedings against banks, the complaint in the suit contains a few choice tidbits culled from internal Bear Stearns emails. The emails cited allegedly refer to mortgage deals with delightful sobriquets such as “sh** breather” and “sack of sh**.”