In one of the few "bank-on-bank" cases arising from the financial crisis, JPMorgan Chase & Co. has emerged the winner in a $3 billion battle with Bank of America. On Tuesday, Southern District Judge Alison Nathan (See Profile) granted summary judgment for Bear Stearns Asset Management Inc. (BSAM), which is owned by JPMorgan, in a dispute over an enormous failed collateralized debt obligation.
Bank of America sued BSAM in October 2008, alleging fraud and breach and contract. Bank of America and BSAM collaborated on a $4 billion collateralized debt obligation, with two BSAM hedge funds supplying the CDOs underlying mortgages. In June 2007 the hedge funds collapsed, and BofA lost nearly $3 billion on the CDO. BofA accused Bear Stearns of "egregious misconduct" for failing to inform BofA in early 2007 that the hedge funds were facing significant withdrawal requests from investors and were about to collapse. BofA also sued BSAM hedge fund managers Ralph Cioffi and Matthew Tannin.
