JPMorgan Chase papered over or ignored analysis showing that the loans it was pumping into the financial system were "defective," according to emails and other documents filed as part of a lawsuit against the company. In September 2006, an outside assessment found that "nearly half the sample pool" was defective, meaning that they did not meet underwriting standards, but internal emails show those findings were ignored or massaged in order to sell the loans and boost profits, the New York Times reports.
There were similar abuses at Bear Stearns and Washington Mutual, which are now JPMorgan subsidiaries—though JPMorgan has argued that it shouldn't be prosecuted for those banks' wrongdoings. At Bear Stearns, employees were tasked with "purging all of the older reports" showing flaws and "leaving only the final reports." One executive once explained the philosophy by saying, "We are a moving company, not a storage company." WaMu, meanwhile, gutted its due diligence staff, and executives who complained faced "harassment," according to an email from one executive. (More JPMorgan Chase stories.)
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