Bear Stearns finally charged

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Guardian, UK - The taskforce charged with prosecuting US banks behind the excesses of the housing boom and bust has brought its first case – to mixed reviews.

President Barack Obama appointed New York attorney general Eric Schneiderman to head the Residential Mortgage-Backed Securities Working Group in January in his state of the union address. "This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans," Obama said.

Late on Monday, Schneiderman announced his first case would be against Bear Stearns, once one of Wall Street's biggest players and now part of JP Morgan.

According to the complaint, Bear Stearns and its lending unit, EMC Mortgage, defrauded investors who purchased mortgage securities packaged by the companies from 2005 through 2007.

The suit argues that wrongdoing was widespread at the firm, and that Bear Stearns made material misrepresentations about the quality of the loans in the securities, ignoring warning signs of trouble ahead as they sold them to investors. The same allegations have been made in several private lawsuits brought against JP Morgan.

John Coffee, a professor at Columbia law school, said it was a "significant move" but said cynics were questioning both the timing and the target. "It's about time there was action, and this is a much broader case than we have seen so far, much broader than the risk-averse SEC [the US's top financial watchdog] would be prepared to bring," he said. "But it's Bear Stearns, not JP Morgan," he said.