* JPMorgan sued over securities sold by Bear Stearns
* Frank was chairman of House Financial Services Committee
* Spitzer defends suit by current New York Attorney General
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.
Also on HuffPost:
Trading Loss 'Puts Egg On Our Face'
Dimon said JPMorgan Chase's unexpected $2 billion loss on credit trades in May "<a href="http://www.huffingtonpost.com/2012/05/10/jpmorgan-chase-london-whale_n_1507662.html?ref=business" target="_hplink">puts egg on our face, and we deserve any criticism we get</a>."
Regulation 'The Nail In Our Coffin'
In March 2011, Dimon expressed his fear over new regulations, warning that higher capital requirements would be "pretty much the nail in our coffin for big American banks," according to the <a href="http://www.ft.com/intl/cms/s/0/3157bcbe-5b05-11e0-a290-00144feab49a.html?ftcamp=rss#axzz1IB5kVGLG" target="_hplink">Financial Times</a>.
Warning that limiting proprietary trading would also affect market making, <a href="http://www.cnbc.com/id/45986077/Jamie_Dimon_Regulators_Undermining_Economic_Objectives" target="_hplink">Dimon was quoted by CNBC</a>, "The United States has...the most liquid [capital markets in the world]. If you lose liquidity because you lose market making, you cost investors money."
'Little To Do With Financial Crisis'
"Proprietary trading had very little to do with the financial crisis," <a href="http://www.gurufocus.com/news/159099/interview--jpmorgan-ceo-jamie-dimon-on-regulation-volcker-rule-some-of-the-global-regulations-are-unamerican)" target="_hplink">Dimon told FOX Business Network Senior Correspondent Charlie Gasparino</a> in January, adding that "you can't even make markets for your clients" with the Volcker Rule.
Volcker 'Doesn't Understand'
"Paul Volcker by his own admission has said he doesn't understand capital markets," <a href="http://dealbook.nytimes.com/2012/04/06/what-volcker-rule-could-mean-for-jpmorgans-big-trades" target="_hplink">Dimon told FOX Business.</a> "He has proven that to me."
Volcker Rule Too Narrow
in February, Dimon asserted the Volcker Rule had been written too narrowly. "If you want to be trading, you have to have a lawyer and a psychiatrist sitting next to you determining what was your intent every time you did something," he was quoted as saying in <a href="http://news.businessweek.com/article.asp?documentKey=1377-aIjS6U8zr2Z8-1PEFKF7I5P2SI88Q43D587IV8L" target="_hplink">Businessweek</a>.