(17 May 2010 – USA) Three major ratings agencies and eight major banks have been subpoenaed by the New York Attorney General, Andrew Cuomo, as an investigation into possible misrepresentation were made about some securities backed by mortgages in order to improve their credit ratings gets underway.A person familiar with the investigation has said that it is unclear if criminal or civil charges would be laid as the investigation is currently in its early stages.
According to the Wall Street Journal, the probe will focus on a range of documents revealing interactions with the rating agencies and the banks; emails and instant messages between the investment banks’ mortgage desks and the analysts responsible for issuing the ratings are of interest to the investigation.
Of the document sort, the investigation will focus on a variety of structured finance products, including collateralised debt obligations and other asset-backed securities. CDOs are securities that can include pools of mortgage bonds as part of their underlying assets.
The source also said that in some of in cases the attorney general is investigating instances where former credit rating agency employees had been hired to work within the investment banks.
The banks targeted are Bank of America Merrill Lynch, Morgan Stanley, Citigroup, Deutsche Bank, Goldman Sachs, UBS, Credit Suisse and Credit Agricole.
The credit rating agencies included in the investigation according to the person familiar with the deal are McGraw-Hill’s, Moody’s Corp’s Moody’s Investor Service and Fimalac’s.