Snappy newsletters. Simple Facebook sharing. Spirited comments. Sweet features are waiting… GET THEM NOW!

Investigators Ask: Did Banks Withhold Info?

Banks hid risk of bundled 'exception' loans, insiders say

By Jim O'Neill, Newser User

Posted Jan 12, 2008 4:35 PM CST

(Newser) – Prosecutors are probing Wall Street banks to see if they ever revealed the risky nature of certain subprime mortgage investments, the New York Times reports. Industry experts are accusing the banks of turning high-risk loans, called exceptions, into investments without divulging details to investors and credit-rating agencies. One probe, led by New York Attorney General Andrew M. Cuomo, could lead to charges within weeks.

Insiders contend that banks knew of the exceptions, made for buyers whose credit was too poor to qualify for loans in a booming market. Experts estimate that some bundles in the $1 trillion subprime market were infected with as much as 80% worth of exceptions. “Common sense was sacrificed on the altar of materialism,” said one exec who saw lenders and banks permit such sketchy mortgages.

Chart shows percentage of foreclosures starts for subprime, FHA, VA, prime and all loans, percentage of seriously delinquent loans and subprime adjustable-rate mortgage forclosure starts; 1c x 3 1/8 inches;... (Associated Press)

Map shows percentage of subprime ARMS loans in foreclosure by state; 2c x 4 inches; 96.3 mm x 101.6 mm (Associated Press)

A home is advertised for sale at a foreclosure auction in Pasadena, Calif. in this Aug. 14, 2007 file photo. Some 2 million homeowners hold $600 billion of subprime adjustable-rate mortgage loans, known... (Associated Press)

New York Attorney General Andrew Cuomo speaks to the media at his office, Wednesday, Nov.7, 2007, in New York. Cuomo announced that his office has issued subpoenas to the nation's two largest financiers... (Associated Press)

NY Attorney General Andrew Cuomo speaks to the media at his office, Wednesday, Nov.7, 2007, in New York. Cuomo announced that his office has sent Letters of Notice and Demand including subpoenas and demand... (Associated Press)

« Prev« Prev | Next »Next » Slideshow

To report an error on this story, notify our editors.

More Newser Stories

This Woman's Job: to Make You Like BofA

Anne Finucane juggles politicians, shareholders, and customers

(NEWSER) - Anne Finucane has one of the hardest jobs in the country: to make us like Bank of America. The high-powered image-maker juggles politicians, interest groups, and her own boss—BofA President Brian Moynihan—in an ongoing effort to resuscitate the bank's flailing reputation and lowly stock price since the 2008 economic collapse. Correct that: Finucane is so powerful, Moynihan has to meet with her. “We all report to Anne,” he once quipped. More»

Perry Gave Huge Tax Grants to Subprime Lenders

Countrywide, WaMu got $35M as they upped risky loans

(NEWSER) - Rick Perry handed mortgage lenders millions to draw them to Texas—right when their risky lending practices surged. The governor gave Countrywide $20 million and Washington Mutual $15 million in what he called an exemplary job-creation move; in effect, that $35 million subsidized dangerous subprime lending, an AP analysis of data and records finds. And when some began to fear the impending mortgage crisis, Perry's rep shrugged off their concerns as “slightly alarmist.” More»

SEC Poised to Charge Fannie, Freddie Execs

But regulatory agency disagrees, and nothing has yet been filed

(NEWSER) - The SEC is making moves toward charging current and former Fannie Mae and Freddie Mac executives, sources tell the Washington Post , but the Federal Housing Finance Agency disagrees with the move. The SEC has sent notices to at least four senior executives over the past eight weeks warning them they may face civil charges, although nothing has been formally filed and the SEC could still change its mind. The executives would be charged with violations related to the housing market collapse, including a failure to provide investors with necessary information about the companies' mortgage holdings. More»

Ernst & Young Hit With Civil Fraud Suit

Andrew Cuomo cites 'massive accounting fraud' in Lehman Bros. dealings

(NEWSER) - Andrew Cuomo filed a civil fraud lawsuit against Ernst & Young today, following reports that the company allegedly helped Lehman Brothers mislead investors . According to the complaint, the accounting firm approved Lehman’s use of “Repo 105” transactions, a type of debt that was labeled as sales to reduce the appearance of risk to investors, and stood idly by while Lehman misled investors and analysts on conference calls, reports the Wall Street Journal . More»

Cuomo Files $26M Suit Against Steve Rattner

Ex-auto czar vows to fight it

(NEWSER) - Talk about timing. On the same day that Steve Rattner got to trumpet GM’s new IPO , Andrew Cuomo filed a trio of lawsuits against the ex-auto czar related to a pay-to-play scandal involving New York’s pension fund. Cuomo’s asking for $26 million in damages, and a lifetime ban on Rattner in the securities industry, Fortune reports. At the same time, the SEC revealed details of a $6.8 million settlement Rattner had agreed to over the same case. More»

NEWS FROM OUR PARTNERS

What is Newser?

Face it: there's too much news. At Newser, we choose the most thought-provoking and entertaining stories from hundreds of US and international sources and reduce them to a headline, picture, and two paragraphs. And we do it 24/7—you can come back morning, noon, night (and in between) for something new that matters. Read less, know more.

Learn more »

Partnering with: Slate

View Newser on the mobile website

Investigators Ask: Did Banks Withhold Info?

Banks hid risk of bundled 'exception' loans, insiders say

OTHER STORIES ON OUR RADAR

Wall Street • subprime mortgages • Andrew Cuomo • home loans • subprime crisis • New York attorney general

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

This Woman's Job: to Make You Like BofA

Anne Finucane juggles politicians, shareholders, and customers

Perry Gave Huge Tax Grants to Subprime Lenders

Countrywide, WaMu got $35M as they upped risky loans

SEC Poised to Charge Fannie, Freddie Execs

But regulatory agency disagrees, and nothing has yet been filed

Ernst & Young Hit With Civil Fraud Suit

Andrew Cuomo cites 'massive accounting fraud' in Lehman Bros. dealings

Cuomo Files $26M Suit Against Steve Rattner

Ex-auto czar vows to fight it

About Us

Site

Newser By Users

Community

Site Maps

Tools

More News

What is Newser?

Investigators Ask: Did Banks Withhold Info?

Banks hid risk of bundled 'exception' loans, insiders say

Bookmark & Share

OTHER STORIES ON OUR RADAR

Wall Street • subprime mortgages • Andrew Cuomo • home loans • subprime crisis • New York attorney general

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

This Woman's Job: to Make You Like BofA

Anne Finucane juggles politicians, shareholders, and customers

Perry Gave Huge Tax Grants to Subprime Lenders

Countrywide, WaMu got $35M as they upped risky loans

SEC Poised to Charge Fannie, Freddie Execs

But regulatory agency disagrees, and nothing has yet been filed

Ernst & Young Hit With Civil Fraud Suit

Andrew Cuomo cites 'massive accounting fraud' in Lehman Bros. dealings

Cuomo Files $26M Suit Against Steve Rattner

Ex-auto czar vows to fight it

About Us

Site

Newser By Users

Community

Site Maps

Tools

More News

What is Newser?