Investigators Ask: Did Banks Withhold Info?

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. (More Andrew Cuomo stories.)