JPMorgan Covered Up Bad Loans, Emails Show
Lawsuit alleges that firms smoothed over analysis to boost profit
By Kevin Spak, Newser User
Posted Feb 7, 2013 8:37 AM CST
In this May 14, 2012, file photo, people arrive at JPMorgan Chase headquarters in New York.   (AP Photo/Mark Lennihan, File)

(Newser) – JPMorgan Chase papered over or ignored analysis showing that the loans it was pumping into the financial system were "defective," according to emails and other documents filed as part of a lawsuit against the company. In September 2006, an outside assessment found that "nearly half the sample pool" was defective, meaning that they did not meet underwriting standards, but internal emails show those findings were ignored or massaged in order to sell the loans and boost profits, the New York Times reports.

There were similar abuses at Bear Stearns and Washington Mutual, which are now JPMorgan subsidiaries—though JPMorgan has argued that it shouldn't be prosecuted for those banks' wrongdoings. At Bear Stearns, employees were tasked with "purging all of the older reports" showing flaws and "leaving only the final reports." One executive once explained the philosophy by saying, "We are a moving company, not a storage company." WaMu, meanwhile, gutted its due diligence staff, and executives who complained faced "harassment," according to an email from one executive.

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Showing 3 of 25 comments
Feb 8, 2013 6:25 AM CST
Maybe Obama can get the JP CEO to serve in the new WH administration?
Feb 7, 2013 8:33 PM CST
Who's fault is all this? I blame Washington. They knew, they understood, they did nothing. Democrats and Republicans alike allowed this to go on, encouraged it... and let us be drowned under it all.
Feb 7, 2013 8:01 PM CST
Bad loans? Excuse me! What the blankety-blank is a bad loan to a bunch of banksters that cry bail us out and voila, presto-chango, abra-ka-dabra business as usual! Well after all aren't there several million high school grads every year that need to be fleeced & enslaved? "It takes a strong people to maintain a good society, only a weak people can begat an evil society." ~ Lord Bishop Cramner (13th century)