NY AG Schneiderman Asks For Wall Street Records For Mortgage Investigation
ALBANY, N.Y. -- New York Attorney General Eric Schneiderman is seeking records from three major Wall Street banks as part of a broad investigation into the mortgage crisis that fueled the recession, an official familiar with the issue said Tuesday.
Schneiderman is meeting with representatives of the Bank of America, Morgan Stanley and Goldman Sachs, according to the official, who spoke to The Associated Press on condition of anonymity. Those meetings are expected to focus on mortgage securities operations during the boom on Wall Street that ultimately cost banks billions of dollars.
The official said securitization of those mortgages would be an area Schneiderman will examine. Packaging mortgages into securities that investors could buy might have concealed risky loans, something critics on Wall Street said was at the center of the mortgage crisis.
The official spoke on the condition of anonymity because of the sensitivity of the continuing investigation.
There was no immediate comment from the banks.
There also was no immediate response to messages left at Schneiderman's offices about the records search, which was first reported by The New York Times and the Wall Street Journal.
The official told the AP that the records search is part of Schneiderman's review of factors that led to the 2008 financial crisis.
Back then, banks sold bundles of risky mortgages with teaser rates that increased after only a few years. Many borrowers ended up defaulting on the loans when the interest rates spiked. As a result, the value of mortgage securities plummeted.
Experts in the area have since said that banks had very little of their own money invested in those mortgages. That led banks to take greater risks, which contributed to the fiscal crisis.
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Associated Press Business Writer Pallavi Gogoi contributed to this report from New York City.
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By MICHAEL GORMLEY 05/17/11 02:28 PM ET Associated Press