Zero Hedge | JP Morgan Sold Investors MBS Covered By “SACK OF SHIT” Loans… Then Shorted All Those With Exposure: A Goldman-AIG Redux
Today’s mortgage fraud stunner comes from Bloomberg’s Jody Shenn who reports on the ongoing lawsuit between Ambac and former Bear Stearns mortgage unit EMC, now part of JP Morgan. “JPMorgan Chase & Co. demanded that a lender repurchase bad mortgages even as it resisted calls to buy back the loans from bonds created by Bear Stearns. “That would be pretty bad” if true, said Joshua Rosner, an analyst at New York-based research firm Graham Fisher & Co. He said such allegations show why “investors and consumers have a right to be distrustful of the banks’ statements.” The bottom line is that JPM, which has so far been able to escape largely unscathed from the fraudclosure scandal, is about to take front and center. The reason: the very first line of the just released Exhibit 1 to the Ambac lawsuit: “In mid-2006, Bear Stearns induced investors to purchase, and Ambac as a financial guarantor to insure, securities that were backed by a pool of mortgage loans that – in the words of the Bear Stearns deal manager – was a “SACK OF SHIT.” But the stunner, and nothing short of a full-blown scandal if proven true, is that Bear Stearns (aka JPM) after funneling misrepresented loans with Ambac’s insurance, “implemented a trading strategy to profit from Ambac’s potential demise by “shorting” banks with large exposure to Ambac-insured securities.” This needs its own congressional hearing right now, followed by a few wristslaps. After all such wholesale fraud can never possibly be prosecuted in the world’s most advanced country.
Be sure to check out the in depth analysis here…
Amended complaint below…