New York's attorney general has sued JPMorgan Chase, alleging that a unit now owned by the banking giant fraudulently sold mortgage-backed securities in the run-up to the 2008 financial crisis.
The civil lawsuit filed Monday by state Attorney General Eric Schneiderman is the first to be brought by the RMBS Working Group the task force formed by President Obama in January to pursue alleged wrongdoing at the time of the financial crisis.
In a complaint filed today in New York State Supreme Court, Schneiderman said Bear Stearns, which is now owned by JPMorgan, deceived investors about the securities, leading to "monumental losses," according to Bloomberg.
Here's more from Bloomberg:
"The current cumulative realized losses on more than 100 subprime and Alt-A securitizations that the defendants sponsored and underwrote in 2006 and 2007 total about $22.5 billion, or about 26 percent of the original balance of about $87 billion, the state said."
The Wall Street Journal reports more cases are expected to follow.
Here's more from the Journal:
"The allegations relate to billions of dollars of subprime securities issued by Bear Stearns Cos. before the troubled firm, now owned by J.P.Morgan, collapsed in 2008. The suit alleges that losses on residential-mortgage securities issued by Bear Stearns in 2006 and 2007 alone were 'astounding,' totaling $22.5 billion, or more than a quarter of the original principal balance. The action asks that the company be made to pay an undisclosed amount of damages 'caused, directly or indirectly, by the fraudulent and deceptive acts.'"
Joseph Evangelisti, a spokesman for the company, told the Journal that JPMorgan is "disappointed" in the decision, and intends to fight the suit.
In a statement, the RMBS said the filing "shows that it is not too late for justice."