[ by Howard Haykin ]

So far, all we heard from New York Attorney General Eric Schneiderman is JPMorgan, JPMorgan, JPMorgan.  Yet the powerful sheriff of Wall Street has had his staff analyzing the mortgage securities practices of at least a dozen financial institutions – that, interestingly agreed to suspend a deadline for him to bring fraud claims, according to a person familiar with the matter.

Yet, JPMorgan Chase & Co. is still the only bank that Schneiderman has sued (earlier this week) for defrauding mortgage bond investors.  His so-called tolling agreements with 12 institutions in fact preserve claims that could expire during a state investigation, according to the person, who declined to be named because the matter isn’t public.

State-Federal Taskforce.    Schneiderman carries a lot of power - not only is he the AG for New York State - the economic capital of the world - but he's also the co-chairman of a state-federal taskforce that's investigating misconduct in the bundling of mortgage loans into securities in the run-up to the financial crisis.  The group, which includes the SEC, the Justice Department, is cutting its teeth with the JPMorgan case as its first legal action.

The tolling agreements serve to stop the clock on the 6-year statute of limitations and ensure Schneiderman the ability to bring civil fraud claims against banks for conduct going as far back as 2006.  Of course, that doesn't necessarily mean that suits will be filed.

Monumental Losses.   In the lawsuit against JPMorgan, Schneiderman said Bear Stearns, which JPMorgan took over in 2008, deceived investors about defective loans backing mortgage bonds, resulting in "monumental losses."  The AG said in a subsequent conference call with reporters that other cases would be filed over mortgage securities, adding that:. 

"We do expect this to be a matter of very significant liability, and there are others to come that will also reflect the same quantum of damages. We’re looking at tens of billions of dollars, not just by one institution, but by quite a few."

Going back to 2006, the top 5 issuers of mortgage securities without government backing included:  (i) Bank of America Corp.’s Countrywide Financial unit, (ii) Bear Stearns and Washington Mutual, also since acquired by JPMorgan.    [Bloomberg, 10/4/12]