More Investigations Planned by the SEC
In an effort to pinpoint dubious practices within the mortgage bond industry the SEC has issued several subpoenas to some of Wall Street’s heavy hitters. The probe is another maneuver by the government to get to the bottom of what actually happened to the housing market, and what role each of the major banks played in it.
Some of the banks that received subpoenas were Goldman Sachs Group, Morgan Stanley, J.P. Morgan Chase & Co., Citigroup Inc, Deutsche Bank, and UBS. The SEC is requesting that these banks supply several documents ranging in scope from draft and final prospectuses, draft and final offering documents, and investor lists that pertain to mortgages.
The focus of the investigation appears to be pointing towards the banks handling of CDO (collateralized debt obligations). The SEC believes that many of the banks who received subpoenas misrepresented investors as to quality of the bond packages that they were selling in pools. Representatives from all parties involved in the probe have refused to comment on the ongoing investigation, including spokespersons from the SEC.
The SEC has also ramped up its civil probe into CDO's. It is the belief of the SEC that some of Wall Streets major players hedged bets and profited on the failure of the bonds that they were selling. Goldman and Morgan Stanley are in the beginning stages of criminal procedures by the SEC for possible fraud in their mortgage bond operations.
In April of this year Goldman wound up in New York federal court facing a lawsuit claiming that one of their traders created a hedge fund that was designed to profit as a result of the failure of the very same investment bonds that the company sold to private investors. Goldman insists that they bear no liability in the case and are currently in talks with the government seeking a settlement.
CDO's were a hot commodity during the new home market boom. Between 2004 and 2007 Wall Street firms sold an estimated $1.08 trillion in packaged mortgages. It was within these packages that a herculean amount of faulty and shoddy underwritten mortgages were gathered and sold to investors and quality investments. Time will reveal not only the truth, but it will also sift out the ones responsible for the untold amount of losses that tax payers had to pay for.
Some of the banks that received subpoenas were Goldman Sachs Group, Morgan Stanley, J.P. Morgan Chase & Co., Citigroup Inc, Deutsche Bank, and UBS. The SEC is requesting that these banks supply several documents ranging in scope from draft and final prospectuses, draft and final offering documents, and investor lists that pertain to mortgages.
The focus of the investigation appears to be pointing towards the banks handling of CDO (collateralized debt obligations). The SEC believes that many of the banks who received subpoenas misrepresented investors as to quality of the bond packages that they were selling in pools. Representatives from all parties involved in the probe have refused to comment on the ongoing investigation, including spokespersons from the SEC.
The SEC has also ramped up its civil probe into CDO's. It is the belief of the SEC that some of Wall Streets major players hedged bets and profited on the failure of the bonds that they were selling. Goldman and Morgan Stanley are in the beginning stages of criminal procedures by the SEC for possible fraud in their mortgage bond operations.
In April of this year Goldman wound up in New York federal court facing a lawsuit claiming that one of their traders created a hedge fund that was designed to profit as a result of the failure of the very same investment bonds that the company sold to private investors. Goldman insists that they bear no liability in the case and are currently in talks with the government seeking a settlement.
CDO's were a hot commodity during the new home market boom. Between 2004 and 2007 Wall Street firms sold an estimated $1.08 trillion in packaged mortgages. It was within these packages that a herculean amount of faulty and shoddy underwritten mortgages were gathered and sold to investors and quality investments. Time will reveal not only the truth, but it will also sift out the ones responsible for the untold amount of losses that tax payers had to pay for.
Comments (1)
Now that the horse has run away lets lock the barn door.
Don Konipol, almost 16 years ago