JPMorgan Covered Up Bad Loans, Emails Show

Lawsuit alleges that firms smoothed over analysis to boost profit

By Kevin Spak,  Newser Staff

Posted Feb 7, 2013 8:37 AM CST

(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.

In this May 14, 2012, file photo, people arrive at JPMorgan Chase headquarters in New York.
In this May 14, 2012, file photo, people arrive at JPMorgan Chase headquarters in New York.   (AP Photo/Mark Lennihan, File)
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