New York State Attorney General Eric Schneiderman has requested information from three of the nation’s most powerful Wall Street firms in connection with an “active and ongoing investigation into the mortgage crisis.” The firms, Bank of America, Goldman Sachs and Morgan Stanley, bundled mortgages into securities and sold them to investors. It has been reported that this helped banks conceal troubled loans. At press time, no specific allegations of wrongdoing had been made by the New York Attorney General’s office.
Last October, Attorneys General in all 50 states, along with the Department of Housing and Urban Development, began an investigation into the mortgage crisis. Settlement negotiations have been ongoing. The New York investigation is said to be a “distinct and broader inquiry.” Mortgage loans packaged as securities were attractive to investors in part because the nation’s largest credit rating agencies often gave them Triple-A ratings. A Triple-A rating generally means that a security is not likely to default, but this wasn’t the case with many of the bundles big banks offered. It has been reported that some of those rated Triple-A defaulted. The 2nd U.S. Circuit Court of Appeals in New York determined last month that the ratings agencies, including Standard and Poor’s, Fitch Ratings and Moody’s Investors Service, could not be held liable for their ratings. This investigation will be watched closely.
Source: ABC News
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