- They further told investors the mortgages had "solid underwriting platforms" and the loans were independently scrutinized.
- Third party firms were hired by the bank to examine the loans that were packaged into securities but when problems were found JPMorgan ignored the warnings as many of the loans did not meet underwriting standards but they decided to accept the loans anyway or altered their classification to a higher rating.
- So the banks employees received this information that in certain instances the loans did not comply with underwriting guidelines but they didn't alert or disclose this information to the securitization investors. Thus the investors were kept in the dark.
- A JPMorgan employee told an Executive Director in charge of due diligence and Managing Director of Trading that due to their poor quality the loans should not be purchased and securitized.
- Even after the employee's concerns were ignored and the loans were purchased and securitized she re-submitted those concerns to another Managing Director which was then distributed to other Managing Directors yet JPMorgan nonetheless securitized the loans and none of this was disclosed to investors.
So JPMorgan in this instance got caught and held to account (or at least to some meager account). But we also know beyond a shadow of a doubt JPMorgan wasn't the only miscreant selling toxic waste securities to unsuspecting investors.
All the big banks and financial institutions were engaged in similar skullduggery with greed run amok including of course Bank of America, Goldman Sachs, Citi-Group, Lehman Bros., Merrill Lynch, Bear Stearns, Washington Mutual (WAMU), CountryWide Mortgage along with Fannie Mae and Freddie Mac and not to be forgotten AIG, the insurance behemoth that insured most of the securitized packages.
The resulting fraud committed by these institutions wasn't a conspiracy, just the way the "masters of the universe" routinely operated under all but total laissez-faire deregulation. The SEC was too connected with the institutions it was supposed oversee and regulate, thus too timid and cowed into non-interference. Throw in the ratings agencies Standard and Poors and Moody's that gave unwarranted high ratings to these financial institutions operations and the inevitable meltdown occurred and with it the great recession.
In retrospect all the austerity measures we now see forced on states and local governments, not to mention countries such as Greece, Spain, Ireland, Iceland et al have all been forced into accepting severe austerity packages as a result of being bilked into buying the toxic waste securities fraudulently sold to them.
So JPMorgan got slapped hard across the wrist with this $13 billion settlement and they did have to admit culpability for their actions.
But this was a civil suit brought against the bank. Criminal suits are still pending in California and possibly other states which JPMorgan couldn't persuade the government to set aside as part of the settlement on Tuesday.
From here, unless jail time is in the offing for the perpetrators of the fraud JPMorgan and these other financial institutions committed one thing is all but guaranteed; they will continue their outsized greed and shady excesses as fines, regardless of how big, won't change the fundamental way they operate.
Hell JPMorgan's chief financial officer emphasized $7 billion of the settlement was tax-deductible.
Choke on that little item for a while.
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