WASHINGTON/LONDON (Reuters) – Five U.S. banks and four European lenders are being investigated by U.S. authorities, as they widen their probe of the role of banks in past mortgage securities deals, according to news reports. The New York attorney general has begun an investigation into eight banks to determine whether they provided misleading information to agencies that rate mortgage securities, The New York Times reported on Thursday.
New York Attorney General Andrew Cuomo’s office issued subpoenas on Wednesday notifying the banks of his investigation, the NYT reported on its website, citing two people with knowledge of the probe. The probe’s targets are Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch, now owned by Bank of America, the report said.
Separately, the Wall Street Journal reported U.S. federal prosecutors, working with securities regulators, were conducting a preliminary criminal probe into whether four banks misled investors about their roles in mortgage bond deals. The banks under early stage criminal scrutiny were JPMorgan Chase, Citigroup, Deutsche Bank and UBS, wsj.com said, citing a person familiar with the matter. They have also received civil subpoenas from the U.S. Securities and Exchanges Commission (SEC) as part of a sweeping investigation of banks’ selling and trading of mortgage-related deals, the report said. A spokesman for JPMorgan told the WSJ it had not been contacted by federal prosecutors and was not aware of any criminal investigation. The other banks either declined comment or were not immediately available.
The reports come less than a month after the SEC charged Goldman with fraud over its marketing of a subprime mortgage product. U.S. federal investigators are also probing Morgan Stanley, the WSJ said on Wednesday. Bank Chief Executive James Gorman said he had no knowledge of any federal investigation. The companies that rated the mortgage deals were Standard & Poor’s, Fitch Ratings and Moody’s Investors Service, it said.
It’s about time. The point here is that we never should have allowed Banks, commercial banks, to be involved in speculative investment instruments. We stopped the practice in 1933 with the Glass-Stegall Act. It was revoked in pieces but was finally undone in 2000. And it only took the banks 8 years to collapse our system. This is just not that hard to see…
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