Bear Stearns’ Blatant Corruption is Revealed

A lawsuit filed in 2008 by mortgage insurer Ambac Assurance Corporation against Bear Stearns and JP Morgan was unsealed last week according to an Atlantic report, revealing incredible evidence of disgusting corruption, cheating and fraud costing investors billions of dollars. Going back to 2005, there were Bear Stearns’ emails between the traders and their superiors saying they were selling investors like Ambac a “sack of s**t”. The suit alleged that Bear Stearns resorted to egregious measures to defraud investors and JP Morgan has been hiding the evidence since the suit was filed in 2008.

According to the news article, Bear traders would sell toxic mortgage backed securities (MBS) to investors and then sell back the bad loans with early payment defaults to the banks that originated them at a discount. The traders then would pocket the refund and not pass it on to the mortgage trust to be distributed to the investors who owned the bonds. The traders were in effect getting paid twice on the deals. In 2007, when Ambac began to realize something was very wrong with its “high-rated” bonds, it demanded that Bear provide loan-level detail and Ambac’s audit showed that 80% of the loans went bad immediately in early payment default. When Bear Stearns collapsed in 2008, JP Morgan stepped in to scoop up what was left and allegedly covered up the fraud allowing executives to reap “tens of millions of dollars in compensation” from the deal.

In related news, insurance giant TIAA-CREFF and others are suing Bank of America’s Countrywide for “massive fraud” regarding its mortgage backed securities (MBS). Bloomberg stated that “Countrywide was an enterprise driven by only one purpose---to originate and securitize as many mortgage loans as possible into MBS to generate profits for Countrywide, without regard to the investors that relied on the critical, false information provided to them with respect to the related certificates.”

Contact our securities law firm for consultation regarding your MBS losses at 1-800-259-9010.

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