morgan it's a civil suit not a criminal suit the complaint contends that bear stearns and its lending unit e.m.c. mortgage defrauded investors who purchased mortgage securities packaged by the companies from two thousand and five to two thousand and seven so max investors lost twenty six percent of their investment in just the two thousand and six and two thousand and seven bond that is twenty two point five billion of eighty seven point five billion of bonds that bear stearns had packaged and sold up to pension funds and others but you do it to me what did you lose those people twenty six percent of their money knowingly brutally. why did you do it you know good rat. well max we've covered this with terry buell a number of times so we've covered the since november two thousand and ten and in fact the investigation however from eric schneiderman did not even start until april two thousand and eleven so we're way ahead of this story on this thanks to terry buell and nick for bits who are also going to have on the show next week eric schneiderman did this suit on behalf of the residenti

yesterday morgan bank is being sued by new york attorney general schneiderman e-mail show that bear stearns now owned by j.p. morgan sold c.d.o. as they described as sacks of and also a great thing are m.b.a.'s which i guess means a gargantuan mounds of or two guys a report is the only financial news program to have been covering this since two thousand and ten with the help of our insider jamie diamond doppelganger mr rat. safety well max yes you're getting into the language of the e-mails that have emerged in this civil lawsuit filed by eric schneiderman j.p. morgan you know it is sued over mortgage securities pools new york attorney general eric schneiderman has filed a civil suit against j.p. morgan as the civil suit not a criminal suit the complaint contends that bear stearns and its lending unit e.m.c. mortgage defrauded investors who purchased mortgage securities pakis by the companies from two thousand and five to two thousand and seven so max investors lost twenty six percent of their investment in just the two thousand and six in two thousand and seven bond that is twenty two poin

the xperia stearns guys well lanny breuer is also on this alleged task force and lanny breuer feel the call we just covered him recently where he was the one who spoke before the new york city bar association saying that deferred prosecution arrangements are perfect i love them they're the best way to deter banking crime. i'm. sure. straight right all right we've talked about her prosecution agreements in the past natalie i mean there are where you can't make this stuff up then they're guilty but we're going to defer to the prosecution how much that cost j.p. morgan itself in response to the civil suit said we're disappointed that the new york attorney general decided to pursue its civil action without ever offering us an opportunity to rebut the claims without developing a full record instead relying on recycled claims already made by private plaintiffs that this private plaintiff of course max is back a formerly giant insurer who insured many of these c.d.o. isn't mortgage backed securities that have now blown up and we covered this two years ago two years ago well before this eric s

you were covering bear stearns before all this went down. >> people at bear stearns despise me.blame me for taking them out. melissa: at bear stearns. >> yes. we won't get into that. i find the intervery fascinating. we should point out who eric snyder man one of the most partisan liberals holding public office. if bear stearns is this basis of a lawsuit, bear stearns is supposed to know that the housing market, the crisis was coming. >> right. >> why didn't barney frank, why didn't chris dodd, why didn't mr. schneiderman and by the way, why didn't fannie and freddie know it was becoming before it hit which they also screwed over investors? so there a lot of 20/20 hindsight. this looks completely political. time for the election. melissa: incredibly political. everyone is saying that. >> you and i will take later tonight maybe we should talk about this. melissa: yeah. >> get to my story right now. there is interesting thing with the libor investigation, alleged manipulation of the london interbank offering rate during the financial crisis. lots of investigations into this going

i covered bear stearns's steady demise into oblivion. let me tell you something, it was not a pretty sight. government, then secretary of treasury, hank paulson and jamie dimon said, please can you buy the company? we'll arrange a deal. jamie dimon bought it. they thought -- there is business reason to buy stuff but they thought they were doing the federal government a favor. here is what we know. there is comfort letter that the securities & exchange commission, linda thompson was enforcement chief at the time basically gave jpmorgan. the comfort level however, only covers federal enforcement action. the agreement enforces the sec to weigh jpmorgan's role or more accurately lack of role, that is, quote, unquote in the comfort letter when assassing charges related to bear stearns. jpmorgan comfort letter covers bear stearns prior to financial condition. that was a concern. bear stearns is saying everything is all right before they blew up. we should point out the comfort letter covers other things that you keep the actions of jaep second

if bear stearns committed fraud, that needs, he pursues that.ever currently owns bear stearns will be on the other end of that enforcement action. i have said generally that i do think enforcement should pu more focus on suing individuals imposing individual accountability, going after personal assets putting people in jail where appropriate. i know those cases are harder to prove but think from the standpoint of discouraging future risk-taking punishing this havior and making sure it doesn't happen again, if you impose persona accountability you will get a lot more bang f the enforcement buck. if you take action against the corporation, the corporation will pay for it, the individual doesn't. melissa: you said to lou bbs we propped up banks instead of fixing the financial system. what do you mean by that. >> i think in 2009 we did have a stable financial system and that we could have, very sick institutions like citi should have been restructured. all banks should have been required to shed their bed assets, clean up their balance sheets. that

acquisition would not be material but i'm not sure i ever said that so here's so bear stearns we were asked to buy so that the fed did us a favor to finance some of that no no we did them a favor i mean let's get this one exactly right we were asked to do it we did it at great risk to ourselves and we had the capability and capital people do extensive due diligence the one thing i was terrified about was you had they gone bankrupt all these lawsuits be no money to be no lawsuits to be no stock drop lawsuits to be no class action lawsuits to be no more it wasn't because the be no money but we bought it in the sec we bought it we knew we had some you know we were buying some of some reports point out i've written extensively about what i've done bear stearns again knowing what i know today it's real close it's really close i will not but what i know today if they called me again to do some again like that i couldn't do it my board or allow me to take on these obligations i did get a letter from one of the senior regulators late on sunday night before we signed it that said please take i

morgan so take us back to march of two thousand and eight tells how bear stearns collapse j.p. morgan came to big bear stearns in that residential mortgage securities business taken from their neck sure well back in march of two thousand and eight you know there was a fateful week that ended on a patrick's day where bear stearns had basically collapsed. in the beginning of the week some tremors had begun where the stock was down ten percent on that monday march tenth and by the end of the week the the total price that j.p. morgan was going to buy the company for was two dollars which was a fraction of what it had been worth you know the reality is though that the collapse of this firm had started long before that week. bear was basically number two in the subprime mortgage business it was forty five percent of their net revenues that the company and really had gotten so outsized that nobody really had a handle on what was going on in that business a bear had a reputation for being a very siloed management culture and by the time the bottom started falling out of the market you

no luck on that one but we did take him to task on the bear stearns acquisition and the civil fraud suit we'll show you what he said later in the show let's get to today's capital account. in the most gray and an inspiring of context out of burgeoning bureaucracy our next guest has managed to amass a highlight reel second to none turning his european parliamentary position into a bully pulpit for a growing movement of euro skeptics take a look. you are all in denial by any objective measure the euro is a failure just who the hell do you think you people are you are very very dangerous people indeed your obsession with creating this your state means that you're happy to destroy democracy so what are you saying that this isn't quite as bad as the us is totally underestimated the complete fanaticism mr barroso of you your colleagues your commission is and the european central bank yes it will mean you lose your job mr brightside but apart from a power for that why can't we do things as mature democracies yes i want you sacked mr schultz as well i want you all five you have the charisma of a

morgan they picked up bear stearns at pennies on the dollar all their assets barclays bank picked up all the lehman brothers assets cheap on the very cheap northern rock collapsed the taxpayer here was given all the bad assets remember the good assets were transferred to jersey or some offshore tax a friend and that was given to the lord knows who but probably j.p. morgan or goldman sachs and in the u.s. one of the banks mentioned the next to go under is morgan stanley so morgan stanley they have a lot of retail brokers they'll go bankrupt because their balance sheet is worth negative billions and they'll end up working for j.p. morgan along with a's greenberg memories to be embarrassed turns famous broker from the one nine hundred eighty s. a little known fact well so they're implementing fiscal tightening as well this is another issue that i'm f. says the europeans have to do more fiscal tightening again that's austerity we see the results in greece we see the results in spain and this is the austerity is imposed that's basically the bad bank the bad assets in spain certainly all t

take over bear stearns. they did. this is a fairly short of a cheap price in terms of investment banking terms. nonetheless, it might be a deal that today regret because of the new york attorney general. they are able to get mortgages that they cannot necessarily of a fort at the time. the banks were slicing as of and repackaging them and selling them to investors. the problem is, according to this complaint, is that bear stearns claimed they were evaluating and monitoring the underlying mortgages. even after people started to default on these mortgages, we continue to slice them up, package them, and sell them to investors. investors lost more than $20 billion on assets on securities that sell for about $80 billion. >> thank you very much for that explanation. gunman have killed at least 25 people in an attack on a student hostel in northern nigeria. a 24 hour curfew is in place. a resident said that the attackers went from door to door shooting and stabbing their victims. the town has previously thing star

banks by this task force most of the allegations are actually against field bank backed bank bear stearns which was bought by j.p. morgan chase and just before the economy went into meltdown in two thousand and eight according to a lawsuit banks at bear stearns knowingly sold defective loans and mortgage backed securities. and kept their investors in the dark about how crummy these deals were and just like the bankers a goldman sachs bear stearns bank stirs openly bragged to each other about how bad the deals were and how much their customers were getting screwed and bear stearns made big money off the fraud at the height of the housing bubble between two thousand and three and two thousand and six bear stearns generated two hundred twelve billion dollars in mortgage backed securities unfortunately all of these securities were to use a more delicate term than the ones that the banks or themselves used crap and when the housing bubble went bust so too did bear stearns which was then bought by j.p. morgan chase the bank that is now liable for all that fraud officials within schneiderman's o

morgan is hit with a fraud lawsuit over behavior in its bear stearn's unit. the man behind the lawsuit, new york attorney general eric schneiderman, joins us. >> tom: and why some american manufacturers think an economic slowdown could be on the way. >> susie: that and more tonight on nbr! it's only october, but at stores around the country, it's beginning to look a lot like christmas. the national retail federation is predicting a 4.1% gain in holiday sales. that would not be as good as last year, but still above the ten-year average. but as erika miller explains, there's greater uncertainty than usual in the forecasts. >> reporter: past the halloween decorations, the candy, and costumes, you will find the artificial trees, wreaths, and tinsel. stores like this kmart are displaying christmas merchandise early, hoping for a greater share of holiday spending. >> they are coming in and looking at the trees and getting the thought in their mind that christmas is coming, and start to think, "what can i start shopping for now?" >> reporter: but forecasters say it'

stearns in 2008? what did yo umiu miss when you said it would not be material. >> we were asked to buy bear stearns. we did them a favor. let's get this right. we have the capability and capital to do due diligence. the one thing i was terrified about was there were all these lawsuits and there would be no money, no action. there would be no money. the second we bought it, we knew we were buying this as it would play out. knowing what i know today, it's really close. but they called me in again to do something like that, i could not. my board would not let me. i did get a letter from one of the senior regulators that said, please take into consideration when you want to come after arrests down the road for something bear stearns did that jpmorgan was asked to do this by the federal government. there are some great people and some terrible things. i forgot the exact number, but we have lost $5-$10 billion on bear stearns and i would put that in the unfair category. i'm a big boy. we will survive. >> th

talk more about it thanks for joining us there david so i stuff want to ask you what exactly bear stearns is being accused of. well they're accused of putting together these mortgage backed securities deals around the height of the housing bubble and they made representations to investors that they would ensure the quality of the loans in the deal would match the underwriting guidelines that were put together in all the associated materials and what they're accused of is not doing that they allow defective loans that did not meet the guidelines into the deal they were rated their third party due diligence specialist who they hired to look at the quality of the loans and told them to you know ramp up the machine and make these loans go you know underwrite them faster and and finally they when they did find loans that were completely defective that had actually gone into default within the first thirty to ninety days of the loan they entered into settlements with those originators and they did not use the money in the settlement and give it to the investors who were owed it because they own

morgan alleging widespread fraud by its bear stearns unit in the sale of mortgage backed securities back before their around the financial crisis will discuss the impact and thousands of millionaire households in the u.s. collected unemployment insurance in two thousand and nine this is according to the congressional research service so who exactly counts as unemployed anyway but we're down with the bureau of labor statistics considers it and word of the day let's get to today's capital account. measured by share market cap as many of you know apple set a record in august as the most valuable u.s. company the world has ever seen now in a world where too big to fail has been singularly associated with the financial sector could a single tech in consumer products giant have a disproportionately visible effect on the larger us economy and if so do we all need to care about something like the i phone five launch or how something like the i phone's new features compare to competitors well if so here's a quick glance just some it goes from here. it's bigger screen goes from here. it's got a bi

people who lost money on bear stearns was bear stearns.shley: how does this play out in court. if you buy something taken everything that comes with it, that is why you do due diligence. >speak of the government that compels the acquisition by jpmorgan chase was the federal government. the suing party is the state of new york. they certainly knew what was going on. all hese were cooked up in d.c. or down on wall street two blocks from here. ultimately a case like this is settled with a transfer of billions in cash to the treasury of the state of new york, not to the people whom the attorney general says were harmed at bear stearns. this is again just another government scheme to transfer cash. tracy: y. now barney frank coming out with this? >> a lawsuit was just filed about three weeks ago and maybe he just now became aware of it. i give him kudos for intellectual honesty. even somebody like barney frank, the father of dodd-frank acknowledges at times the government can go too far and this is one of those heavy acknowledgments. tracy: jud

morgan of course acquired bear stearns so this is having to do with mortgage backed securities sales i think before j.p. morgan acquired bear nonetheless it's surrounding mortgage backed securities and you're saying that you actually think there is a connection between the fed's announcement of targeting mortgage backed securities so i'm curious could you just follow through a little bit more for our viewers the connection between a suit like this and how that actually affects mortgage backed securities in this market let's suppose the best and has a large before you have made i think maybe three which is a fun pool back securities that almost everybody in the street realize is full of nonsense. fraud etc but you know everything to go the pins with the bid is so sort of getting one hundred cents on a dollar or eighty cents on the dollar. thirty cents on the dollar for twenty cents ok here comes. right alleging that this allegation seems to be cropping up everywhere that bear stearns actually so mortgage backed securities after they stop performing ok there's so much bad securities af

right this is stearns was purchased by j.p. morgan chase in. mid two thousand and eight and this concerns mortgage backed securities deals that they had created and sold to investors and they used a lot of deceptive practices misrepresentations in terms of what they said they were going to do in terms of insuring the quality of the loans. and what they actually did which was speed the loans through the pipeline and allow defective loans that did not meet the underwriting standards into the securities deals in this cost the investors massive amounts of money i believe the number of losses on the deal specifically in this lawsuit total about twenty two point five billion dollars now this lawsuit if you take a look at it named the at the company bear stearns the now defunct company why is that does that make sense should an individual or or individuals be named or that the company commit the fraud. names no individuals because it's a civil suit i mean you may get some in institutional accountability out of this but you're not going to get any indi

plus, pay no interest for 3 years on beautyrest black, stearns & foster, serta icomfort, even tempur-pedic

new york's attorney general filed the suit claiming bear stearns misled investors. the suit is the first to be filed under a group set up by the obama administration to investigate misconduct that caused the 2008 financial crisis. jp morgan says it will will contest the suit. and notes that the alleged actions took place before it bought bear stearns. >>> american express is paying $112 million in refunds and fines to settle accusations it duped customers. federal regulators say the credit card company charged unlawful late fees and deceived card holders into paying off old debts or buying extra card services. they will refund about $85 million to about 250,000 customers. >>> and the holiday shopping forecast isn't frightful, but it's also not so delightful. the national retail federation is expecting americans to spend a little more than 4% more than they did last year, but that is less of an increase than we've seen in the past two years, and the smallest growth we've seen since 2009. so don't expect to get much more this year. >> i was going to say as long as i g

to $10 billion on the bear stearns things now.put it in the unfair category. >> overall he says it is unfair that they are being looked at as having benefited from it had when clearly now this is going to be something they have to deal with. interestingly, he was making all these wide ranging comments. he'll be talking to analysts on friday when jpmorgan reports earnings. >> all right, bertha. thank you. >>> trading action now, bob pisani. the dow still down 100 points. >> yeah. couple things. put up the s&p 500. we're now at negative for october for the s&p 500 and the dow jones industrial average. haven't seen that in a while. also a thing to note is we're only 2.8% from the 4 1/2 year highs that we hit a few weeks ago. so this is not a correction of any sort. this is not about europe today. the euro was fractionally higher today. dollar fractionally weaker. that's normally a help for stock. it is more like warnings. we had warnings from cummins, that's weighing on the markets and weak energy markets. look at the s&p sectors her

morgan bear stearns e-mail refers to bonds sack of s. asterix astra caster ect. but the bank kept for existing them on investors says lawsuit so these are the mortgage backed securities that bear stearns now owned by j.p. morgan packaged into but this into securities and sold on to pension funds around the world they refer to one of them of course as a bleep breather i'm not going to be surprised when j.p. morgan and jamie diamond ounces are going to take this and then resell the public as an animal resell i.p.o. valued at a billion dollars and then turn that into a collateralized and about reselling plot of life debt obligation to sell to some german bank and then will explode and then i don't pose austerity should the greeks are going to end up paying for the use out of the bags once again. well ronald eugene robinson is the name of this thirty four year old who is convicted he faces up to ten years in prison and a two hundred fifty thousand dollars fine so for packaging up his used anima and reselling it to unsuspecting customers.

stearns in 2008? what did you miss when you said it would not be material. >> we were asked to buy bear stearns. we did them a favor. let's get this right. we have the capability and capital to do due diligence. the one thing i was terrified about was there were all these lawsuits and there would be no money, no action. there would be no money. the second we bought it, we knew we were buying this as it would play out. knowing what i know today, it's really close. but they called me in again to do something like that, i could not. my board would not let me. i did get a letter from one of the senior regulators that said, please take into consideration when you want to come after arrests down the road for something bear stearns did that jpmorgan was asked to do this by the federal government. there are some great people and some terrible things. i forgot the exact number, but we have lost $5-$10 billion on bear stearns and i would put that in the unfair category. i'm a big boy. we will survive. >> the fi

morgan as a civil suit not a criminal suit the complaint contends that bear stearns and its lending unit e.m.c. mortgage defrauded investors who purchased mortgage securities packaged by the companies from two thousand and five to two thousand and seven so max investors lost twenty six percent of their investment in just the two thousand and six in two thousand and seven bond that is twenty two point five billion of eighty seven point five billion of bonds that bear stearns had packaged and sold up to pension funds and others but you do it to me what did you lose those people twenty six percent of the money knowingly brutally honest so why did you do it you know good rat well max we've covered this with terry buell a number of times so we've covered the sense.