Bank probes expanding with new investigation

By @ibtimes on

U.S. authorities are expanding their probes of past mortgage securities deals, with New York's attorney general opening an investigation into whether eight banks misled rating agencies, a source familiar with the matter said.

New York Attorney General Andrew Cuomo's office on Wednesday served subpoenas on four U.S. banks and four European lenders, the source said.

Cuomo is targeting Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs Group Inc, Morgan Stanley, UBS and Merrill Lynch, now owned by Bank of America, the source said.

The investigation comes as Wall Street and major banks around the world are attracting scrutiny from regulators stemming from transactions that occurred in the run-up to the subprime mortgage meltdown and financial crisis.

The Wall Street Journal on Wednesday reported that 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 are JPMorgan Chase, Citigroup, Deutsche Bank and UBS, the newspaper reported on its website, citing a person familiar with the matter.

The banks have also received civil subpoenas from the U.S. Securities and Exchanges Commission as part of a sweeping investigation of banks' selling and trading of mortgage-related deals, the report said.

A spokesman for JPMorgan told the Journal the bank 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 Sachs with fraud over its marketing of a subprime mortgage product.

Federal investigators are also probing Morgan Stanley, The Wall Street Journal reported on Wednesday. The bank's chief executive, James Gorman, said he had no knowledge of any such investigation.

The companies that rated the mortgage deals were McGraw-Hill Cos Inc's Standard & Poor's, Fitch Ratings and Moody's Investors Service, a unit of Moody's Corp.

The New York attorney general's investigation was first reported by The New York Times.

Spokesmen for UBS and Deutsche Bank declined to comment, and a spokeswoman from Credit Agricole declined to comment on the New York Attorney General's investigation. The other banks did not immediately return messages seeking comment.

(Reporting by Steve Eder in New York, JoAnne Allen in Washington and Steve Slater in London; editing by Todd Eastham, Karen Foster and John Wallace)

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