Authorities in New York and Connecticut are investigating whether Wall Street banks hid crucial information about high-risk home mortgage loans bundled into securities that were sold to investors, Connecticut's Attorney General said on Saturday.
The investigations, first reported on Saturday by the New York Times, center around "no-doc" or "exception" loans, that did not even meet even subprime standards, Attorney General Richard Blumenthal said.
"The loans were made to people who did not have any documents to verify their income or other verification for key requirements normally applied to mortgage borrowers," he said.
"Many of the lenders made large amounts of loans, so that the exception swallowed the rule, or became the rule," Blumenthal said.
The loans were sold by subprime lenders to Wall Street firms that bundled them with other, less risky, loans into securities.
Investigators want to find out whether the banks properly disclosed the high risk of default on those loans when selling those securities to investors in Connecticut and elsewhere, Blumenthal said.
"The investment banks may have used very broad, boilerplate disclaimer language that effectively failed to disclose fully and fairly all the information," he said.
Blumenthal said Connecticut is cooperating with New York and that the investigation may eventually include the US Securities and Exchange Commission.
The Times said charges could be filed in the coming weeks.
Jeffrey Lerner, a spokesman for New York Attorney General Andrew Cuomo, declined to comment on Saturday.
In November, Cuomo said he issued subpoenas to government-sponsored lenders Fannie Mae and Freddie Mac in his investigation into what he claims are conflicts of interest in the mortgage industry. He said he wanted to know about billions of dollars of home loans they bought from banks, including the largest US savings and loan, Washington Mutual Inc, and how appraisals were handled.
Spokesmen for both lenders said they require accurate appraisals and both agreed to appoint independent examiners as requested. Washington Mutual said it was conducting its own internal investigation into Cuomo's claims and that "the company will vigorously defend itself from all unfounded allegations and lawsuits."
Blumenthal declined to say which firms were under investigation, but said his office had issued more than 30 subpoenas.
"These practices involving trillions of dollars in securities sold to ordinary investors go to the core of our financial system's integrity and efficiency," Blumenthal said. "We regard this investigation as a priority."
UPDATED (3:40pm): A suspected gas explosion at a shopping mall in Taichung this morning has killed four people and injured 20 others, as emergency responders continue to investigate. The explosion occurred on the 12th floor of the Shin Kong Mitsukoshi in Situn District (西屯) at 11:33am. One person was declared dead at the scene, while three people were declared deceased later after receiving emergency treatment. Another 20 people sustained major or minor injuries. The Taichung Fire Bureau said it received a report of the explosion at 11:33am and sent rescuers to respond. The cause of the explosion is still under investigation, it said. The National Fire
ACCOUNTABILITY: The incident, which occured at a Shin Kong Mitsukoshi Department Store in Taichung, was allegedly caused by a gas explosion on the 12th floor Shin Kong Group (新光集團) president Richard Wu (吳昕陽) yesterday said the company would take responsibility for an apparent gas explosion that resulted in four deaths and 26 injuries at Shin Kong Mitsukoshi Zhonggang Store in Taichung yesterday. The Taichung Fire Bureau at 11:33am yesterday received a report saying that people were injured after an explosion at the department store on Section 3 of Taiwan Boulevard in Taichung’s Situn District (西屯). It sent 56 ambulances and 136 paramedics to the site, with the people injured sent to Cheng Ching Hospital’s Chung Kang Branch, Wuri Lin Shin Hospital, Taichung Veterans General Hospital or Chung
ALL-IN-ONE: A company in Tainan and another in New Taipei City offer tours to China during which Taiwanese can apply for a Chinese ID card, the source said The National Immigration Agency and national security authorities have identified at least five companies that help Taiwanese apply for Chinese identification cards while traveling in China, a source said yesterday. The issue has garnered attention in the past few months after YouTuber “Pa Chiung” (八炯) said that there are companies in Taiwan that help Taiwanese apply for Chinese documents. Minister of the Interior Liu Shyh-fang (劉世芳) last week said that three to five public relations firms in southern and northern Taiwan have allegedly assisted Taiwanese in applying for Chinese ID cards and were under investigation for potential contraventions of the Act Governing
‘LAWFUL USE’: The last time a US warship transited the Taiwan Strait was on Oct. 20 last year, and this week’s transit is the first of US President Donald Trump’s second term Two US military vessels transited the Taiwan Strait from Sunday through early yesterday, the Ministry of National Defense said in a statement, the first such mission since US President Donald Trump took office last month. The two vessels sailed south through the Strait, the ministry said, adding that it closely monitored nearby airspace and waters at the time and observed nothing unusual. The ministry did not name the two vessels, but the US Navy identified them as the Arleigh Burke-class guided-missile destroyer USS Ralph Johnson and the Pathfinder-class survey ship USNS Bowditch. The ships carried out a north-to-south transit from