Emails show that JP Morgan knew mortgage deals were bad

>>> show." there is more troubling news from wall street . a new lawsuit accuses banking giant jpmorgan chase of hiding bad loans from investors. the belgian bank dexia bought over a billion dollars worth of mortgage-backed securities from the firm and is now accusing jpmorgan and the companies it acquired, bear stearns and washington mutual of egregious fraud, say thanksgiving created and sold mortgage bonds backed by loans that they knew to be skpepgsally bad. and there is proof.

>> internal e-mails uncovered in a lawsuit against jpmorgan chase now show employees may have known about serious flaws with thousands of home loans leading up to the financial crisis .

>> hundreds of e-mails as well as employee interviews all part of dexia's lawsuit offer a new look into wall street 's mortgage machine. according to "the new york times," the documents filed in federal court reveal that jpmorgan ignored quality controls, sometimes ignoring them entirely in a quest for profit. and the e-mails show there was a lot of internal pressure to unload the securities.

>> a 2006 bear stearns e-mail reads like something out of glen gary glen ross. everybody start to unload. use the sales force. use the dealer desk. get on your game.

>> jpmorgan deny nice wrongdoing and is contesting the allegations in court. joining me tonight, former new york governor and former attorney general of new york , eliot spitzer . mr. spitzer, good to have you with us.

>> ed, thank you for inviting me.

>> this has got to be a clear indication of fraud as i see it. these are damaging e-mails.

>> absolutely. remember, the defense of the banks has traditionally been we got it wrong, but we didn't lie. we made a mistake, but we didn't deceive. the beauty of e-mails is they give you a contemporaneous vision and understanding of what people knew. these e-mails make it very clear. and there are equally damning e-mails related to many other banks that at the time wamu, bear stearns securitized the debt, they knew the mortgages were bad. that is the essence of this, and it completely debunks their defense.

>> where is the justice department ?

>> absent, missing in action . look, you and i think have the same frustration. we thought with a president obama , with the justice department unlike what we saw in the bush administration , that embraced the banks and believed in self regulation , believed in the mythology, wall street can't do anything wrong we thought these guys would step up to the plate and prosecute and be aggressive. it hasn't happened. lanny breuer, head of the criminal justice division, major, major disappointment. i'm glad he is leaving. he has been an abject failure.

>> if they did any investigating at all, how can they not find these e-mails? that.

>> is the fascinating question there are a set of documents produce bade company called clayton that was a due diligence company that years ago was hired by the banks to go in and say are these mortgages good? and as you said in the top of the segment, they found out the mortgages were bad. so what did the banks do with that information? suppressed it. anybody who had done a good investigation would have seen this, charged the banks , charged individuals, and said let's finally unravel this daisy chain that is killing our economy.

>> this is the dot that needs to be connected for the american people . this drove us right damn near off the cliff. and it's cost the american taxpayers a boatload of money because we've had to subsidize what, a stimulus package that has put us further in debt in this country. and how can these folks get off scot-free?

>> it is an outrage. the anger you and i feel should be felt by everybody. but it goes beyond that. the cost of the cataclysm has been estimated at $13 trillion. i'm sick and tired of hearing the banks say we repaid the t.a.r.p. money, as if that was the entire magnitude of what we owed them, or they owed us. here is the other figure. every year, ed, we subsidize these too big to fail institutions by $83 billion because we guarantee them, their borrowing costs go down. that's not my number. that's bloomberg. it's a crazy amount of money that they benefit from our subsidy.

>> and the remedy is congressional action, laws, oversight, regulation.

>> but it's prosecution. we had the laws.

>> start with the prosecution, then we go to the law.

>> we had enough laws. we had the laws, we didn't have prosecutors willing to do what is hard, which is to look -- jamie dimon had the best pr in the world. his bank time and time again fraud, misbehavior, corruption from libor to the london whale to securitizing bad debt . the mythology of jamie dimon should be ripped apart. people should know the truth about jpmorgan.

>> tonight we learn the banking industry recorded its highest earnings since before the financial crisis . wall street bonuses are also up, yet the middle class still feeling the pinch in this country in a big, big way. what is the solution?

>> well, look, the solution is that since 1975 , median family income has been flat. wages have been flat because we have permitted the tax burden to shift to the middle class and the poor, and we have exempted the wealthy. we have broken down union rules that permitted unions to organize. we have also had technology and globalization, two things we can't repeal and shouldn't repeal. but we need social policies that begin to help the middle class , which means changes in tax policy , rules relating to organization.

>> governor spitzer , good to have you with us on "the ed show" tonight. come back.

>> i.

>> thank you so much.

>>> up next, the south wants the federal government to stop meddling in their elections. the whole country needs to pay very close attention to the supreme court of the united states tomorrow.

>>> and new jersey governor chris christie was not invited to the biggest republican gathering of the year. coming up, i'll tell you why republicans are pushing him aside, and the panel will weigh. in stay