Federal and New York state investigators are widening their probe into past Wall Street mortgage securities deals, taking a closer look at the practices of five U.S. banks and four European lenders in the years before the collapse of the housing market, persons close to the investigation said.
New York Attorney General Andrew Cuomo's office issued subpoenas on Wednesday notifying the banks of his investigation, which will parallel a federal inquiry, sources said.
Cuomo's office is looking into whether any of the eight banks provided misleading information to rating agenices in order to get better ratings on risky securities, said the person, who spoke on condition of anonymity because the investigation has not been made public.
The eight banks being looked at are Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Crédit Agricole and Merrill Lynch -- now owned by Bank of America.
The companies that rated the mortgage deals are Standard & Poor’s, Fitch Ratings and Moody’s Investors Service. Investors used their ratings to decide whether to buy mortgage securities.
Separately, theWall Street Journal reported today that federal prosecutors, working with securities regulators, are conducting a preliminary criminal probe into whether four banks misled investors about their roles in mortgage bond deals.
Citing a source familiar with the investigation, the WSJ said the banks under early-stage criminal scrutiny are J.P. Morgan Chase & Co., Citigroup Inc., Deutsche Bank AG and UBS AG. Those banks also received civil subpoenas from the Securities and Exchange Commission as part of a massive probe of banks' selling and trading of mortgage-related deals, the source told the WSJ.
Reports of the new investigations come less than a month after the SEC charged Goldman with fraud over its marketing of a subprime mortgage product.
