New York Attorney General Andrew Cuomo has launched an investigation into eight banks to determine if the misled mortgage ratings agencies regarding mortgage securities. Cuomo's office will investigate how the banks profited from bundling and selling sub-prime mortgages.
During the housing boom, Wall Street banks often packaged pools of risky subprime mortgages. The securities were then given top-notch ratings and investors purchased them, in part, because of their high
Banks subject to the investigation included: Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutche Bank, Credit Agricole and Merril Lynch, which is now part of Bank of America.
The rating agencies, such as Standard & Poors, Moody's Investors Service and Fitch Ratings Agencies were paid by the banks to grade their securities. Investors relied upon the ratings services for objective evaluation, not knowing that the information was inaccurate.
The securities have been widely blamed for the mortgage crisis and costing investors billions of dollars in losses. The ratings agencies have come under fire for giving high ratings to pools of sub-prime and non-performing mortgages.