By Aruna Viswanatha
WASHINGTON, Oct 22 (Reuters) - Democratic Congressman Barney
Frank defended the largest U.S. 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, who served as chairman of the House Financial
Services Committee during the Bear Stearns acquisition, said
federal and state officials should reconsider holding financial
firms liable for the wrongdoing of institutions they absorbed at
the government's urging.
"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," said Frank, who was also the co-author of the
2010 Dodd-Frank financial reform law.
New York Attorney General Eric Schneiderman sued JPMorgan,
the nation's largest bank by assets, on Oct. 1 over
mortgage-backed securities packaged and sold by Bear Stearns.
But Schneiderman gained support from former New York
Attorney General Eliot Spitzer who said in a statement that the
complaint catalogs evidence of "platform-wide wrongdoing".
"It is a necessary action to bring accountability for the
mortgage meltdown and the financial collapse. Widespread
misconduct should not disappear simply because one bank has been
acquired by another."
Earlier this month, JPMorgan Chief Executive Jamie Dimon
lashed out at the lawsuit, saying it could make financial firms
think twice about rescuing their failing rivals.
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, he said.
In defending JPMorgan, Frank, who is retiring at the end of
this term, backed up Dimon's assertion that the government
pushed Bear Stearns onto JPMorgan.
Federal 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.
Frank also drew a line between what he said were fair legal
actions and unfair ones, 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.
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