October 18, 2012 — Letter to the Editor of the Wall Street Journal by Phil Angelides
Your Oct. 8 editorial “Biting the Bank That Saved You” misses the mark in criticizing the lawsuit alleging mortgage securities fraud brought by New York Attorney General Eric Schneiderman against J.P. Morgan. That action rightly seeks redress for allegedly improper conduct at Bear Stearns which was acquired by J.P. Morgan in 2008.
The attorney general’s legal complaint cites evidence of systemic wrongdoing at Bear Stearns in the purchasing, bundling and selling of mortgage securities to investors, including sweeping failures of due diligence and disclosure to investors. As the lawsuit indicates, the official report of the Financial Crisis Inquiry Commission contained detailed evidence on these practices at major financial institutions and stated that the failure to disclose critical information to investors raised serious questions regarding violations of securities laws.
The editorial’s contention that J.P. Morgan should be spared from legal scrutiny for misconduct at Bear Stearns is misplaced. J.P. Morgan decided to purchase Bear Stearns with significant assistance from the U.S. taxpayers, knowingly taking on Bear Stearns’s assets and liabilities. J.P. Morgan itself stated that the acquisition “provided the Firm with a leading global prime brokerage platform; strengthened the Firm’s equities and asset management businesses; enhanced capabilities in mortgage origination, securitization and servicing; and expanded the platform for the Firm’s energy business.”
If wrongs have been committed, they need to be righted. If money was illegally taken from investors, it needs to be returned. That’s how our legal system is supposed to work.
Financial Crisis Inquiry Commission (2009-2011)