Firms Face Billions More in Damage Claims As Chickens Finally Come Home To Roost

JPMorgan’s rivals may face government lawsuits claiming tens of billions of dollars in damages tied to investor losses on mortgage bonds after New York’s attorney general filed a fraud lawsuit against the nation’s biggest bank by assets.

Bloomberg reports that a U.S. state-federal task force set up this year to investigate misconduct in the bundling of mortgage loans into securities will bring other cases, according to New York Attorney General Eric Schneiderman. Investor losses in the JPMorgan case alone will be 'substantially more' than the $22.5bn cited in his complaint, he said.

'We do expect this to be a matter of very significant liability, and there are others to come that will also reflect the same quantum of damages', Schneiderman said in an interview yesterday with Bloomberg Television’s Erik Schatzker. 'We’re looking at tens of billions of dollars, not just by one institution, but by quite a few'.

Schneiderman alleged that the Bear Stearns business that JPMorgan took over in 2008 deceived mortgage-bond investors about defective loans backing securities they bought. Bear Stearns 'systematically failed' to evaluate loans, ignored defects uncovered and 'kept investors in the dark' about review procedures and problems with the loans.

The Bear Stearns mortgage unit packaged $212bn in mortgage bonds from 2003 through 2006, according to the state’s complaint. Losses on $87bn of those bonds packaged during just two of those years total $22.5bn so far, it estimated.

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