Banks Face New Probe in Lending Crisis Blame Game

by devteam May 18th, 2011 | Share

The New YorkrnTime and the Associated Press are reporting that the New York StaternAttorney General, Eric Schneiderman, is quietly investigating threernmajor American banks and their role in the mortgage securities market prior tornthe housing crash.  Gretchen Morgensonrnwriting in the Times says that Bankrnof America, Goldman Sachs, and Morgan Stanley have been asked for informationrnand documents and Schneiderman’s office has requested meetings with bankrnrepresentatives.</p

Morgenson gathered her information from people whornwere briefed on the matter but are not authorized to speak publicly.  She said that the inquiry appears to be “quiternbroad” with requests for information covering many aspects of the banks’ loanrnpooling operations.</p

The three banks were among many who put togetherrnbundles of home loans and used to them as collateral for securities sold torninvestors such as insurance companies and pension funds.  Millions of the loans have defaulted, leavingrnmany investors with virtually useless paper.  </p

The Associated Press is reporting that Schneidermanrnhas already scheduled meetings with the banks which are expected to focus onrnthe mortgage securities operations.</p

According to Morgenson, the requests from the AG’srnoffice seems to confirm that Schneiderman is unwilling to accept one of thernterms of the settlement agreement proposed between financial institutions andrnthe attorneys general of most other states. rnThat condition would require regulators to forego additional investigationsrninto the banks’ activities during the time leading up to the mortgagerncrisis.  The other attorneys general havernfocused their inquiry primarily on the actions of servicers many of which arernsubsidiaries of major banks.</p

It is unclear whether Schneiderman is looking at filingrncharges or if those charges will be civil or criminal in nature.  His predecessor, now New York Governor,rnAndrew Cuomo pursued some mortgage lenders aggressively winning changes regardingrnappraisal standards and other concessions but no charges were filed against anyrnbanks.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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