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« Goldman Sachs Lost Money On Just Two Days Last Quarter | Main | Dummy Tanks For The Russian Army Fool Enemies »
Friday
May102013

Emails Prove JPMorgan Committed Massive Mortgage Fraud

TEFLON JAMIE

This Bankster is Too Big Too Jail
The system is just too darn frail
These men are like God
We must accept fraud
Or else the whole system may fail

The Limerick King

 

---

Emails Show JPMorgan Committed Massive Mortgage Fraud

New York Times Dealbook

JPMorgan Chase CEO Jamie Dimon has tried his best to suggest that the financial crisis was someone else's fault. But a batch of court documents released this week undermine this claim, indicating that the bank knew the mortgage investments it sold were seriously flawed.

According to the documents, which include emails and transcripts of employee interviews filed in an investor lawsuit by Europe's Dexia Bank, JPMorgan hired independent analysts to review the quality of the home loans it was packaging for sale prior to the collapse of the housing market.

That review found that 20 to 80 percent of the mortgages did not meet underwriting standards, Bloomberg reports.  These documents show that JPMorgan bundled these mortgages into complex securities anyway and then sold them to investors without disclosing their problems, according to Bloomberg and the New York Times.

The lawsuit, which was filed by Dexia, a Belgian-French bank, is being closely watched on Wall Street. After suffering significant losses, Dexia sued JPMorgan and its affiliates in 2012, claiming it had been duped into buying $1.6 billion of troubled mortgage-backed securities. The latest documents could provide a window into a $200 billion case that looms over the entire industry.

According to the court documents, an analysis for JPMorgan in September 2006 found that “nearly half of the sample pool” — or 214 loans — were “defective,” meaning they did not meet the underwriting standards. The borrowers’ incomes, the firms found, were dangerously low relative to the size of their mortgages. Another troubling report in 2006 discovered that thousands of borrowers had already fallen behind on their payments.

But JPMorgan at times dismissed the critical assessments or altered them, the documents show. Certain JPMorgan employees, including the bankers who assembled the mortgages and the due diligence managers, had the power to ignore or veto bad reviews.

In some instances, JPMorgan executives reduced the number of loans considered delinquent, the documents show.  In others, the executives altered the assessments so that a smaller number of loans were considered “defective.”

In some instances, JPMorgan executives reduced the number of loans considered delinquent, the documents show. In others, the executives altered the assessments so that a smaller number of loans were considered “defective.”

The court documents make clear that JPMorgan employees were well aware of these flaws and even exchanged emails about them.  For example, after a review finding that at least 1,154 mortgages were delinquent, JPMorgan told investors that only 25 loans were delinquent.

Continue reading...

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Bonus clip:

Bloomberg reports on the case.

 

Photos by William Banzai7

 

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Reader Comments (15)

Now what. Do we get our money back. Does Teflon Banker Man go to the real jail. You know Madoff has got to have a reallly chapped ass.
Feb 21, 2013 at 7:46 AM | Unregistered CommenterSKINFLINT
Just so everyone is clear, this Dealbook article addresses the junior varsity problem in the MBS space, namely, the selling of AAA securities with the knowledge that these securities were unworthy of the AAA rating. This is your garden variety securities fraud claim. It's a member of the JV team for two reasons. First, as a criminal case, it's pretty difficult to prove because the defendant can hide behind the AAA rating, which was issued by a third party that supposedly knew what it was doing. Second, the defrauded party didn't lose everything, only (say) 50-80 cents on the dollar.

You have not and you will not, dear reader, see Dealbook or any other MSM source take on the varsity team of MBS fraud, namely, the selling of MBS that weren't backed by any mortgages at all. This fraud is far more severe because the underlying security is completely worthless, as are the all of the securities that came out of the Xerox machine on which the underlying security was placed for copying. What is more, this varsity fraud is relatively easy to prove: what possible inference other than intentional deceit is available where the defendant has sold the same mortgage multiple times?

Dealbook is not allowed to discuss this aspect of mortgage fraud, because it is this very Ponzi scheme that drove the lead engine of the crisis, and JPM is up to its neck in this fraud by way of Bear Stearns:

http://www.washingtonsblog.com/2010/10/professors-black-and-wray-confirm-that-bear-pledged-the-same-mortgage-to-multiple-buyers.html

You see, if MSM started talking about this varsity mortgage Ponzi system, curious readers might begin asking why Bernie Madoff is sitting in federal prison without 100,000 banker friends who paid themselves bonuses for doing exactly what Madoff did. And Jamie Dimon doesn't tolerate questions, as the stunningly incompetent lies that he told Senator Merkley illustrated with such clarity.
Feb 21, 2013 at 12:57 PM | Registered CommenterCheyenne
@Cheyenne

Madoff did not own the "law," like our banker buddies...Dimon, and all of his cohorts, do not tolerate Qs because they do not have to. Why? Because they own DC...

I am re-reading Chris Whalen's book "Inflated" and am constantly struck by the parallels made by Whalen between the House of Morgan (and the other NYC national banks) and today's national banks. Morgan and a few others owned congress and the legislative branch. Nothing has changed but the players. The game is the same.

Dr. Ben Carson is right. We are Rome. And some of us know what happened to Rome. If you don't, read up. It's not a happy ending...
Feb 21, 2013 at 1:43 PM | Unregistered CommenterJosie
Cheyenne

I remember that story (from Wash Blog) and a few others like it and then...nothing.

To my knowledge, we've heard nothing since. Who owns the MBS securities with nothing inside. Surely an institutional investor who bought these securities would speak up and sue. It's one of the stranger dead ends of the crisis.
Feb 21, 2013 at 3:11 PM | Registered CommenterDailyBail
"Who owns the MBS securities with nothing inside."

The investment trusts, including pension funds, 401(k) plans, insurance companies, governments, municipalities, etc. But like any Ponzi, everyone is happy as long as the revenue stream continues. In this case, it's the servicers who pass along the payments.

"Surely an institutional investor who bought these securities would speak up and sue."

In some cases they have. The inherent problem, though, lies with the managers of the trusts. How does one even frame the key paragraphs of the complaint? "Awww, what the fuck?! I blew all the investors' money on empty boxes after telling them I'd done my due diligence in certifying their contents, when in reality I was taking the seller's word that everything was cool. The seller lied to me!!!" Not an enviable position to be in...
Feb 21, 2013 at 4:17 PM | Registered CommenterCheyenne
I'm going to frame that one Cheyenne, and put it on my office wall.
Feb 21, 2013 at 4:59 PM | Unregistered Commenterjohn
Outlaw JPMorgan, CITI, Barclay, and LIBOR NOT guns. These companies cause more deaths in America than guns. Would you rather deal with a assault bankster or an assault rifle?
Feb 22, 2013 at 12:15 AM | Unregistered CommenterStrayhorse
Hi all, just a head's up...Huffpo did an article on Senka's Foreclosure Fraud radio program...the same one John Titus was on as a guest last week. Huffpo is...well...Huffpo but I digress.

Meet the Voice of Angry Homeowners

http://www.huffingtonpost.com/joel-sucher/voice-of-angry-homeowners_b_2682192.html
Feb 22, 2013 at 3:34 PM | Unregistered Commenterchunga
That's awesome. I'm going to try to get something posted on it this weekend.
Feb 22, 2013 at 3:50 PM | Registered CommenterDailyBail
"In some cases they have. The inherent problem, though, lies with the managers of the trusts. How does one even frame the key paragraphs of the complaint? "Awww, what the fuck?! I blew all the investors' money on empty boxes after telling them I'd done my due diligence in certifying their contents, when in reality I was taking the seller's word that everything was cool. The seller lied to me!!!" Not an enviable position to be in... "

I think in most cases they are not speaking up because they were paid a lot of money to do their job certifying those "contents" before purchase. Speaking up would be an admission that they took a lot of money from the investors and did not do the job they were paid for...

Which opens up a new realm of liabilities for themselves.

The important thing to remember is that the politicians responsible will continue to be reelected, bad behavior in the financial sector will continue to be rewarded thus there is no reason for it to stop, and austerity will be forced on us all as punishment for daring to have actually saved for our future through the funds you mention above.
Feb 23, 2013 at 7:42 AM | Unregistered CommenterS. Gompers
Laws are as good, sustainable and equitable as the enforcement used to insure justice is served. Enforce the law equitably. There is no to big to fail. Iceland is recovering. So will the remained of the world. Take the banksters down. Why are LIBOR execs still out on the street?
Feb 25, 2013 at 8:50 PM | Unregistered CommenterStrayhorse
It was as pig `n a poke from the get go.

Repeal Glas Stteg - allowing FX market makers, who, btw, are also equities, commodities, monetary, debt, and debt insurance market makers, as well as central bank primaries, can short sell sovereign contracts to devalue the currency and manipulate higher prices from declining value.

Lehman Brothers was retailing mortgages - say again, a bond shop was also selling mortgages that underlie a bond.
Why?

Everybody in the mortgage sales cycle was gaming mortgages. Underwriters were falsifying documents, inspectors were over valuing the asset and real estate agents were bidding up prices. The primaries, who were also kiosk mortgage vendors knew and planned on the fact that the collapse of the houing market would get a fat USD print from the FED, thus, continuing the goal of USD devaluation to jack equities.

Sub prime paper was being sold to A plus borrowers - A+ paper for million dollar homes was being sold to nail salon technicians.

The bailout was not to purposed to redeem the bondholders, the bailout was to cover the the CDS underwriters, who, btw, also happened to be the very same gaggle of pig pokers who retailed the debt used to create the bonds that the CDS coverage they sold to insure.the bonds they sold.

A stat: The bailout could have pad off all the mortgages in the US and 90% of US credit card debt.

A multi generational crime syndicate, no, not the made for TV mafiosi, but the banks and bankers, structured the game. The repeal of Glass Steeg was part of the plan and it played out just as they intended.

Lehman was always the intended sacrificial lamb. After it bellied up bankrupt, there was no where, thankfully, for investigators to go - it was just a grand F-up - a tsunami - a calculus so complicated no one could understand it.

And if you believe that ...

Guessing they be figuring if the sheep are so stupid to believe the Americans would rather die in an exploding fireball slamming into concrete at 600 mph, than get a scratch from a box-cutter - they'll believe anything - so the kiddie fondlers on the hill came up with the made for prime time sweat shirt slogan, " Tsunami" - Yeah - tell those idiots it was a tsunami - they'll believe anything the K-Street Johnnies tell `em.

The bond factories lied on the prospectuses chartering the bonds. The DoJ case against the rating agencis will fizzel away - cause no one wants the facts to come out - especially the primaries that packaged the bonds and lied on the prospectuses the rating agencies use to score the bonds.
Feb 26, 2013 at 5:35 AM | Unregistered CommenterThrob
30 GH/s Bitcoin Miner
Until we become united and strong, able to legally prosecute (pay the lawyers) to go after the war-criminals (US Presidents, congress members, military elite, corporate (Military Industrial Complex) CEOs, banker elites... when you say "What should we do... what-have-you." It's only TALK. They laugh at us TALKING. We need to use the technology we have to become united and strong enough to prosecute. Please study and apply the info I provide at: http://www.worldtruth.org/blog/6917/a-united-freedom-movement/ www.DanielHall4Freedom.ws
Feb 26, 2013 at 9:52 AM | Unregistered CommenterDaniel Patrick Hall on Facebook
TIMELINE-Drexel to Enron, MG to RBS: A genealogy of JPMorgan's commodity arm
http://www.reuters.com/article/2014/02/05/jpmorgan-commodities-mercuria-idUSL2N0KW1W720140205

Feb 5 (Reuters) - The physical commodity trading business thatJPMorgan Chase & Co is in exclusive talks to sell to Swiss-based trader Mercuria is a vast global enterprise, parts of which have been bought and sold many times over several decades.

While parts of the business have passed through the hands of some of the most famous and infamous names in the raw materials markets, its core is comprised of two enterprises considered among the most successful of their time: Sempra Commodities and Bear Stearns' power and gas desk.

But major parts of the JPMorgan business were extracted from the ashes of failure, including a base metals operation that endured through the near-collapse of Metallgesellschaft and the Enron meltdown, and a trading platform that dates back to the days of failed investment bank Drexel Burnham.

More recently, much of the business had already been bought and sold twice in the past five years, once when Royal Bank of Scotland bought a 51 percent stake in Sempra Commoditiesand then again when RBS was forced to sell it to JPMorgan.

A partial history of the business is below:

THE EARLY YEARS

1980s - Drexel Burnham Lambert expands into physical energy trading, hiring a team that includes future Sempra chiefs David Messer and Frank Gallipoli.

1986 - UK-based warehousing group Henry Bath & Sons is taken over by Metallgesellschaft (MG), a huge German conglomerate and one of the world's largest physical and futuresmetal traders, according to a history on its website.

Early 1990 - AIG acquires the commodity trading business of Drexel Burnham, which had filed for bankruptcy.

1997 - Pacific Enterprises and Enova Corp acquire the energy unit of AIG Trading for $225 million. (The utilities merge one year later to form Sempra Energy )

2000 - Enron buys UK-listed MG Plc, including Henry Bath warehouses, for $448 million.

ENRON OUT, OTHERS JUMP IN

2002 - Sempra Energy Trading buys Enron Metals Ltd, the former-MG metals division of the failed U.S. Enron for $145 mln.

2002 - UBS buys Enron's energy trading business in exchange for royalties to Enron creditors. The deal includes leases to several million barrels of oil storage in Canada.

2004 - Sempra Energy Trading is renamed Sempra Commodities. By 2005, the unit contributes more than half of parent company Sempra's net income; makes over half a billion dollars in 2007.

Sept. 2005 - Bear Stearns moves into energy trading through joint-venture with Calpine. Deal ends six months later, but Bear Stearns continues to expand in the power and gas markets.

Nov. 2006 - Bear Stearns buys Delta Power Co., a private power-plant developer with 1,380 megawatts of capacity.

May 2007 - Bear Stearns' commodity arm buys the electricity trading book and gas and power contracts of Williams Cos for $512 million, giving it about 7,700 MW of gas-fired tolling capacity and 1,800 MW of full-requirements power supply.

JPMORGAN'S ACQUISITION SPREE


March 2008 - JPMorgan buys Bear Stearns, including its now-large energy trading business...
Feb 10, 2014 at 4:13 PM | Unregistered Commenterjohn

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