Barney Frank cries foul in government's lawsuit against JPMorgan

WASHINGTON Mon Oct 22, 2012 7:16pm EDT

U.S. Rep. Barney Frank (D-MA) holds the gavel during the final session of the Democratic National Convention in Charlotte, North Carolina September 6, 2012. REUTERS/Jason Reed

U.S. Rep. Barney Frank (D-MA) holds the gavel during the final session of the Democratic National Convention in Charlotte, North Carolina September 6, 2012.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - Democratic Congressman Barney Frank defended the nation's largest bank on Monday, saying in a statement that the government was wrong to go after JPMorgan Chase & Co for the alleged misdeeds of Bear Stearns.

Frank, the co-author of the 2010 Dodd-Frank financial reform law, said federal and state officials should reconsider holding financial firms liable for the wrongdoing of institutions they absorbed at the government's urging.

The unusual statement comes after New York Attorney General Eric Schneiderman sued JPMorgan, the nation's largest bank by assets on October 1 over mortgage-backed securities packaged and sold by Bear Stearns.

A JPMorgan spokeswoman declined to comment.

Since that suit was filed JPMorgan Chief Executive Jamie Dimon lashed out at the decision.

At a Washington event on October 10, Dimon said his bank and its shareholders were still paying the price for doing the Federal Reserve "a favor" by buying Bear Stearns in early 2008, when its instability was threatening the larger financial system.

Dimon said the suit could make financial firms think twice in the future about rescuing their failing rivals.

Frank, who served as chairman of the House Financial Services Committee during the Bear acquisition, said in his statement: "The decision now to prosecute J.P. Morgan Chase because of activities undertaken by Bear Stearns before the takeover unfortunately fits the description of allowing no good deed to go unpunished."

Frank backed up Dimon's assertion that it was the government that pushed Bear Stearns on JPMorgan.

Federal officials "believed that the failure of Bear Stearns would have terribly negative consequences for the economy," Frank said.

The officials urged JPMorgan "to do a good deed by taking over an institution which, I believe, the bank would never have sought to acquire absent that urging," he said.

A spokesman for the New York Attorney General's office did not immediately respond to a request for comment.

Frank also drew a line between what he said were fair legal actions and unfair ones, while noting he was not advocating for immunity for banks.

For example, he said Bank of America should probably be shielded from government legal action related to Merrill Lynch, which Bank of America took over in part because of federal officials' urging.

However, Frank said he was aware of no federal urging that led former Bank of America CEO Ken Lewis to take over Countrywide.

(Reporting By Aruna Viswanatha. Editing by Andre Grenon)

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Comments (9)
Chieftac wrote:
I never thought I would ever agree with Franks. He is correct in this matter. The Government (Fed) made these banks buy these bad assets, then the Government turns around and tries to prosecute them for indiscretions of Bear Sterns.

Oct 22, 2012 6:48pm EDT  --  Report as abuse
Harry079 wrote:
“The Government (Fed) made these banks buy these bad assets,”

True statement. But what was the reason the Fed did this?

Why did these big commercial banks join in this conspiracy with the Fed and the Treasury?

I know why. Let’s here what others think.

Oct 22, 2012 8:06pm EDT  --  Report as abuse
Speaker2 wrote:
What do you think happens when officials at the fed, treasury and Justiice are former Street wheelers and dealers. You think they will ruin those future jobs at Wall street or K street.

Oct 22, 2012 8:08pm EDT  --  Report as abuse
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