January 15, 2014 View entire issue of ANO         Close 

Feds Probe Alleged Intentional MBS Misrepresentations

Federal regulators have launched an investigation into whether or not numerous large Wall Street banks cheated customers in the aftermath of the financial crisis by deliberately mispricing mortgage bonds, The Wall Street Journal reported Jan. 7.

The Journal called the probe “a potential blow” to the banks given that they only recently have begun to recover from years of federal scrutiny and lawsuits.

Federal investigators believe a number of Wall Street firms, including Barclays, Citigroup, Deutsche Bank AG, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Royal Bank of Scotland may have made misrepresentations about billions of dollars’ worth of difficult-to-price mortgage-backed securities on their books in the years following the financial crisis. Between 2009 and 2011, traders allegedly sold those bonds at artificially depressed or inflated values.

The U.S. Securities and Exchange Commission and the special inspector general for the Troubled Asset Relief Program are conducting the probe. Sigtarp helped fund some of the firms that purchased the RMBS in question.

This latest probe suggests that despite the SEC winding down cases against Wall Street firms that were believed to have been instrumental in causing the financial crisis, legal headaches for the nation’s biggest banks will continue into the future, the Journal reported.

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