Goldman Sachs, Wall Street Banks Under Investigation - SEC Sends Subpoenas In New Mortgage Probe: Sources
(Reuters) - U.S. regulators have opened a new line of inquiry in their mortgage foreclosure probe and are asking big Wall Street banks about the beginning stages of mortgage securitization, two sources familiar with the probe said.
The Securities and Exchange Commission launched the new phase of its investigation by sending out a fresh round of subpoenas last week to big banks like Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Goldman Sachs Group Inc and Wells Fargo & Co, the sources said.
The SEC's subpoenas focus on the earliest stage of the mortgage securitization process, said the sources, who requested anonymity because the probe is not public.
The sources said the SEC is asking for information about the role of so-called "master servicers" -- specialized firms that oversee the selection and maintenance of the large pool of home loans that go into every mortgage-backed bond.
In many cases, Wall Street banks that underwrite mortgage-backed securities either own their own master servicing firms or are closely aligned with one.
The state of Arizona sued Bank of America on Friday, accusing the bank of misleading consumers about its home loan modification process.
One of the sources said the SEC is seeking information about the role banks had in mortgage securitization. The regulator is also looking at the role trustees for the trusts that issued the mortgage-backed securities had in monitoring the performance of the underlying loans.
The SEC is looking at whether loans were properly transferred to the trusts that issued the securities, the source said. The renewed look at the securitization process is an extension of the SEC's preliminary probe into the mortgage mess.
Separately, the SEC is still investigating banks, credit rating agencies and individuals in connection with the 2007-09 subprime crisis. Those investigations center around potential misrepresentations to investors about the value of the mortgage-backed securities that helped fuel the crisis.
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Dec 17, 2010 at 4:21 PM
Reader Comments (10)
http://www.reuters.com/article/idUSTRE6BG3UW20101217
http://blogs.bu.edu/bunow/2010/07/12/the-future-of-derivatives-trading/
GE et.al trying to cash in. Read the comments.
Senate delays vote on EPA carbon rules.
http://www.reuters.com/article/idUSTRE6BF5YG20101218
http://www.globalresearch.ca/i...
[snip]
Derivatives are basically just bets. Like at a racetrack, you don’t need to own the thing you’re betting on in order to play. Derivative casinos have opened up on virtually anything that can go up or down or have a variable future outcome. You can bet on the price of tea in China, the success or failure of a movie, whether a country will default on its debt, or whether a particular piece of legislation will pass. The global market in derivative trades is now well over a quadrillion dollars – that’s a thousand trillion – and it is eating up resources that were at one time invested in productive enterprises. Why risk lending money to a corporation or buying its stock, when you can reap a better return betting on whether the stock will rise or fall?
http://www.imf.org/external/pubs/cat/longres.cfm?sk=3554.0
And this:
http://etatsunisdeurope.com/reuters-tax-derivatives-to-fund-imf/
[snip]
The standard objection is that unless all major economies agree to implement the charge, money will simply move to those countries that do not apply it. By good fortune, a central CDS clearing house was one of the proposals to tighten up on derivatives outlined by U.S. Treasury Secretary Tim Geithner last week. That means the world’s biggest derivatives markets could all soon be using they same system.
« The days when a major insurance company could bet the house on credit default swaps with no one watching and no credible backing to protect the company or taxpayers from losses must end, » Geithner told Congress in a veiled reference to AIG.
He did not mention the idea of taxing CDS trades. That would likely meet resistance from the financial industry and from Congress and other parliaments, jealous of their sovereign national revenue-raising powers.