NEW YORK (CBSNewYork/AP) - According to New York's Attorney General, even while the nation's economy was collapsing, Bear Stearns was only looking at its own bottom line and was lying to investors.
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The federal government on Tuesday threw its support behind a lawsuit against JPMorgan Chase accusing Bear Stearns, the investment bank JPMorgan bought in 2008, of engaging in massive fraud in deals involving billions in residential mortgage-backed securities.
At a news conference, acting Associate U.S. Attorney General Tony West credited a federal-state working group of law enforcement agencies created by President Barack Obama in 2009 with assembling evidence in the lawsuit brought by the New York attorney general's office.
The Obama administration has been under heavy political pressure to hold major Wall Street players accountable for the nation's biggest financial collapse since the Great Depression. Bear Stearns was sold to JPMorgan Chase in 2008.
John Walsh, the U.S. Attorney for Colorado, said 11 federal prosecutors interviewed more than 40 significant market participants in the investigation by New York Attorney General Eric Schneiderman and that the Justice Department provided a dozen investigative analysts to review millions of pages of documents.
Schneiderman said the company bought up all kinds of bad loans in order to sell them and generate fees.
"It's clear that they put the interest of their relationship with the lenders, they're ability to get more of these loans, ahead of the interest of the investors," Schneiderman said Tuesday.
And while documents indicate the loans were vetted, Schneiderman says it wasn't true.
"Because their systems for ensuring loan quality were a sham," he said.
The lawsuit alleges that Bear Stearns led its investors to believe that the loans in its portfolio of residential mortgage-backed securities had been carefully evaluated and would be monitored. The suit alleges Bear Stearns failed to do either.
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