The Wall Street Bull (Creative Commons)

According to the suit, failed investment company Bear Stearns continued to place high-risk loans into bonds during the housing boom, despite warnings from an outside contractor that 17 percent of the loans were defective. 

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The suit is the first brought against a big bank by the federal mortgage task force created by the Department of Justice in January.

Attorney General Eric Schneiderman is co-chairman of the task force, officially called the Residential Mortgage-Backed Securities Working Group. He brought the suit in New York State court Monday.

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A JPMorgan representative told the New York Times it would contest the allegations.

“We’re disappointed that the New York A.G. decided to pursue its civil action without ever offering us an opportunity to rebut the claims and without developing a full record — instead relying on recycled claims already made by private plaintiffs,” said Joseph Evangelisti, the bank’s spokesman.

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The allegations are not the first of their kind. Private suits emerged as early as 2010, when litigants attempted to sell back defective mortgages to the banks – like Bear Stearns - that sold them.

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According to the Huffington Post, the lawsuit is “one of the more significant actions taken by a law enforcement agency to date against a Wall Street bank.”

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