At the time, it was assumed that this collossal collapse was due to "just" the so-called mortgage crisis. But earlier this year, accusations emerged that former Bear executives, now working for Goldman Sachs, Bank of America and Ally Financial, were defrauding investors through the mortgage securities they created and sold while at Bear.
According to emails and internal documentation, JP Morgan has known about this fraud since they took ownership of Bear in 2008, but deliberately hid that information from the public.
In 2008, US mortgage insurer Ambax Assurance Corp, filed a lawsuit against Bear Stearns and JP Morgan. In the court bundle were emails going back to 2005, highlighting Bear Stearns traders telling their superiors that they were selling investors like Ambac a "sack of shit".
Unfortunately for JP Morgan, in May of 2010, a number of whistleblowers stepped forward, telling stories of falsifying loan performance data, and senior traders pocketing cash that should have gone to investors.
In January of this year, JP Morgan CEO Jamie Dimon said it would take years to get through all the mortgage litigation risk that the bank has inherited when it bought Bear Stearns, and that they had set aside $9 billion for litigation related risk.
According to freelance financial investigative journalist Teri Buhl, a dozen or more new whistleblowers have come forward to the authorities. JP Morgan is "showing signs of fear", she says, as Morgan's lawyers continue to try to cover up the criminality that took place at Bear Stearns.
JP Morgan is right to be worried. It has a rumoured $1 trillion of ex-BS off the balance sheet worthless paper sitting on its back. Should that be confirmed as a result of the ongoing investigation, JP Morgan will see its "market value" move very quickly towards its true value - zero.
Is JP Morgan too big to fail?
