Wall Street Firms Subpoenaed in Mortgage Shakeup

December 5, 2007 No Comments »

New York Attorney General Cuomo has continued his investigation into the mortgage crisis, this time targeting Wall Street firms who packaged and sold mortgage-related debt.

The firms involved include Bear Stearns, Deutsche Bank, and Merrill Lynch, according to unnamed sources reported by the Wall Street Journal.

The subpoenas, sent by Cuomo’s office, are requesting information about how debt was pooled into securities and how closely the firms reviewed the quality of mortgages packaged, along with information regarding the firms’ relationships with the credit rating agencies.

The Journal said the investigation is examining the relationships between mortgage companies, third-party due-diligence firms, securities firms and credit-rating firms, and what role each played in the current crisis.

A Merrill spokesman declined to comment on the matter directly but said, “We always cooperate with regulators when asked to do so.” The other firms involved declined to comment.

The article also mentioned that the Securities and Exchange Commission has opened about two-dozen investigations related to the mortgage collapse.

Last month, Cuomo’s office sued Santa Ana-based First American Corp. and its eAppraiseIt mortgage appraisal unit for falsely inflating house values tied to Washington Mutual loans.

Both Fannie Mae and Freddie Mac were subpoenaed as part of his mortgage appraisal probe, and have agreed to the demand to retain an Independent Examiner to conduct a thorough review of all Washington Mutual appraisals and related mortgages purchased by the financiers.

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