Several high-profile Wall Street firms that packaged and sold subprime mortgages have been subpoenaed by New York prosecutors, the Wall Street Journal reports today. Merrill Lynch, Bear Stearns, and Deutsche Bank—among others—will be asked to explain how the offerings were reviewed before they were sold to investors, and what relationship the firms had with credit-rating services.
Last month, state prosecutors, apparently probing mortgage appraisals, subpoenaed giants Fannie Mae and Freddie Mac. The subprime debacle has spawned multiple state and federal investigations, with authorities appearing to focus on how risky subprime mortgages moved from lending institutions to Wall Street without being red-flagged. The collapse has cost markets billions, and led to hundreds of thousands of foreclosures.