Authorities investigate whether agencies misled

New York’s attorney general has launched an investigation into eight banks to determine whether they misled ratings agencies about mortgage securities, according to a person familiar with the inquiry.

New York Attorney General Andrew Cuomo speaks in Albany

New York Attorney General Andrew Cuomo speaks in Albany

NEW YORK — New York’s attorney general has launched an investigation into eight banks to determine whether they misled ratings agencies about mortgage securities, according to a person familiar with the inquiry.

Attorney General Andrew Cuomo is trying to figure out if banks provided the agencies with false information in order to get better ratings on the risky securities, said the person, who asked not to be identified because the investigation has not been made public.

Cuomo’s office is investigating Goldman Sachs Group Inc., Morgan Stanley, UBS AG, Citigroup Inc., Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch, which is now part of Bank of America Corp.

A spokesman from Bank of America, which is based in Charlotte, N.C., said it is co-operating.

Representatives from Goldman Sachs, Citigroup and Credit Agricole declined to comment. Spokesmen from the other banks were not immediately available for comment.

During the housing boom, Wall Street banks often packaged pools of risky subprime mortgages together. The securities were then typically given top-notch ratings and investors purchased them, in part, because of their high ratings.

The ratings, issued by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings, are used as a guide for investors to assess how risky an investment might be.

As the housing market collapsed and more customers fell behind on repaying their mortgages, the securities’ value began to fail.

The securities have been widely blamed for exacerbating the credit crisis and costing investors and the banks themselves billions of dollars in losses. The ratings agencies have come under fire for having given such high ratings to securities that soured.

The attorney general’s probe comes as federal regulators are investigating whether some of the banks misled investors when marketing and selling the securities and other investments that were tied to mortgages.

The U.S. Securities and Exchange Commission charged Goldman Sachs with fraud over its packaging of mortgage securities. Goldman is facing a separate criminal investigation into the same securities. Goldman has denied the charges and plans to defend itself.

Earlier this week it was reported that federal prosecutors are investigating whether Morgan Stanley misled investors about its role in a pair of $200 million derivatives whose performance was tied to mortgage-backed securities.

The increased scrutiny over how banks managed, packaged and portrayed mortgage securities and derivatives comes as Congress discusses a major overhaul of financial regulations. Politicians have said an overhaul would add more transparency to investments and trading.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The interchange at Highway 2 and McKenzie Road at the south end of Gasoline Alley is being redesigned with two roundabouts. Construction is expected to begin this month and finish in October. (Graphic from Red Deer County)
Roudabouts coming to McKenzie Road overpass at Gasoline Alley

Project expected to improve traffic flow at busy intersections

A federal strategy to preserve threatened trout could conflict with provincial coal leases in the Eastern Slopes of the Rockies. (Contributed photo by Jeff Lund).
Federal regulations could save Alberta’s bull trout by shutting down mining plans, says biologist

Ottawa’s new strategy identifies a 30-metre protected area along rivers and streams

(Contributed image)
Wolf Creek Public Schools will not participate in curriculum pilot

Central Alberta school jurisdiction joins others across Alberta

Canada's Sarah Pavan and Melissa Humana-Paredes, fom left, celebrate after winning women's gold medal match against Brazil's team at the Beach Volley Worldtour Major Series, in Vienna, Austria on August 4, 2019. THE CANADIAN PRESS/AP, Ronald Zak
Canada’s world champion beach volleyball duo finally getting games before Tokyo

Canada’s world champion beach volleyball duo finally getting games before Tokyo

Toronto Raptors center Khem Birch (24) gets fouled by Atlanta Hawks guard Bogdan Bogdanovic (13) during the first half of an NBA basketball game Tuesday, April 13, 2021, in Tampa, Fla. (AP Photo/Chris O'Meara)
Bogdanovic, Capela lead Hawks past Raptors 107-103

Bogdanovic, Capela lead Hawks past Raptors 107-103

Toronto Blue Jays starting pitcher Hyun Jin Ryu throws to a New York Yankees batter during the first inning of a baseball game Tuesday, April 13, 2021, in Dunedin, Fla. (AP Photo/Mike Carlson)
Ryu sharp into 7th, Semien homers as Blue Jays top Yanks 7-3

Ryu sharp into 7th, Semien homers as Blue Jays top Yanks 7-3

Calgary Flames' Johnny Gaudreau (13) scores the game winning goal on Toronto Maple Leafs goaltender David Rittich (33) in overtime NHL action in Toronto on Tuesday, April 13, 2021.THE CANADIAN PRESS/Frank Gunn
Gaudreau scores in overtime, Flames beat Maple Leafs 3-2

Gaudreau scores in overtime, Flames beat Maple Leafs 3-2

Jim Bullock, Vicki Pappas and Randy Waples off to Canadian Horse Racing Hall of Fame

Jim Bullock, Vicki Pappas and Randy Waples off to Canadian Horse Racing Hall of Fame

Canada's Evelyne Viens celebrates scoring against Wales during the women's international friendly soccer match at Leckwith Stadium, Wales, Friday April 9, 2021. THE CANADIAN PRESS/Nick Potts/PA via AP
Canada capitalizes on England mistakes to win women’s soccer friendly 2-0

Canada capitalizes on England mistakes to win women’s soccer friendly 2-0

After weekend hiccup at men’s worlds, Grand Slams move into curling bubble

After weekend hiccup at men’s worlds, Grand Slams move into curling bubble

Erickson Gallardo of Canada's Toronto FC and his teammates celebrate after Andres Mosquera of Mexico's Leon scored an own goal during their Concacaf Champions League soccer match in Leon, Mexico, Wednesday, April 7, 2021. THE CANADIAN PRES/AP/Mario Armas
Toronto FC gets vaccine boost but injury list still an issue ahead of Leon rematch

Toronto FC gets vaccine boost but injury list still an issue ahead of Leon rematch

Most Read