And the message is don't try to help the Government, you'll only get screwed over:
The civil suit, filed by New York Attorney General Eric Schneiderman, accuses Bear Stearns of failing to ensure the quality of loans underlying residential mortgage-backed securities.Now, I give the NY AG the benefit of the doubt and assume that there is indeed a reasonable case to answer for (former?) Bear Stearns employees and management undertaking dubious deals in the run up to the 2008 financial crisis. However, CEOs Jimmy Cayne and Alan Schwartz were fired in short order after the takeover, so it's not entirely clear whom Eric Schneiderman intends to blame for the company failings.
It relates to securities sold by Bear Stearns in 2006 and 2007 - before it was taken over by JP Morgan
Let's be clear about this. Bear Stearns was about to implode on March 16th 2008. That implosion would have had unknown but likely dreadful consequences for the American banking system. The Fed (and the Treasury Sec Hank Paulson) leaned on Jamie Dimon of JP Morgan to buy out Bear Stearns with nearly zero notice; JP Morgan had no time to do any due diligence on the takeover. For sure they got Bear Stearns at a good price: $1.2bn at $10/share, but they had no opportunity to do the kind of investigation that would have uncovered evidence of these alleged dubious practices.
Eric Schneiderman is working hard to ensure that when the next financial crisis rolls around (and it will), large American firms will be much more hesitant to step into the breach when the US Government asks. If they feel that they will be freely screwed over for Doing the Right Thing, why should they help?