New York Attorney General Eric Schneiderman has filed a lawsuit against JP Morgan Chase alleging widespread fraud in the sale of mortgage backed securities.
It was the first lawsuit filed against a major bank involved with the 2008 financial crisis.
“Finally a major Wall Street bank has been sued for fraud for its reckless lending that helped cause the 2008 financial collapse,” said Dennis Kelleher, president of Better Markets, a nonprofit organization that promotes the public interest in the financial markets.
“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. That caused the worst economy since the Great Depression of the 1930s and should have been aggressively prosecuted. Hopefully this lawsuit is the first of many and the lawbreakers on Wall Street will be punished like everyone else in American when they break the law.”
Schneiderman alleges in the lawsuit that JP Morgan Chase “committed multiple fraudulent and deceptive acts in promoting and selling” of the mortgage backed securities.
At the heart of the fraud was the failure of the bank “to abide by their representations that they took a variety of steps to ensure the quality of the loans” underlying the securities “including checking to confirm that those loans were originated in accordance with the applicable underwriting guidelines, i.e., the standards in place to ensure, among other things, that loans were extended to borrowers who demonstrated the willingness and ability to repay.”