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Bear Stearns said it was doing "due diligence" to make sure the mortgages it was packaging were sound. But the process was shoddy. "Rather than carefully reviewing loans for compliance with underwriting guidelines, Defendants instead implemented and managed a fundamentally flawed due diligence process that often, and improperly, gave way to originator's demands," says the lawsuit by New York attorney general Eric Schneiderman. The workers who were supposed to be vetting the loans were pushed to process as many as possible and not to look at them very carefully. "Have 1594 loans to do in 5 days," wrote one team leader in an e-mail, according to the suit. "Sound like fun? NOT!"
In other words, the government has alleged that JPMorgan and the companies it later acquired were offloading bad mortgages on other parties (mortgage-backed securities investors, and U.S. taxpayers) through their lax practices. The Justice Department was said to be on the verge of launching a new civil suit along the same lines before negotiations over a settlement heated up.