Cuomo Probes Banks' Influence on Ratings

Bank of America and Citigroup are reportedly among the banks being investigated by New York AG Andrew Cuomo over whether they misled the rating agencies about CDO deals.
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NEW YORK (

TheStreet

) --

Bank of America

(BAC) - Get Report

,

Citigroup

(C) - Get Report

and several large foreign banks including

UBS

(UBS) - Get Report

,

Credit Suisse

(CS) - Get Report

and

Deutsche Bank

(DB) - Get Report

are reportedly on a list of banks being investigated by New York Attorney General Andrew Cuomo over whether they misled the rating agencies about the safety of certain mortgage-backed securities, several media reports have said.

Cuomo has reportedly issued subpoenas to the banks, which also include

Goldman Sachs

(GS) - Get Report

,

Morgan Stanley

(MS) - Get Report

, Credit Agricole and Merrill Lynch, now owned by Bank of America, over whether they provided false information to the ratings agencies in order to get better ratings on the now-obvious risky securities, the

New York Times

and

Associated Press

cited a people familiar with the matter.

So far Cuomo has not announced any formal investigations. The banks have reportedly declined to comment to media outlets regarding the speculation.

The investigations come at an already perilous time for the large trading-oriented institutions following the

Securities and Exchange Commission's

civil suit against Goldman Sachs last month for allegedly misleading investors about the riskiness of certain collateralized debt obligations, complex derivatives that were ultimately backed by shoddy mortgages.

Speculation, while not yet confirmed, has said that Goldman Sachs is also being investigated on possible criminal charges by the U.S. Justice Department. According to the

Wall Street Journal

on Wednesday, Morgan Stanley is also reportedly being investigated by the Justice Department for similar supposed offenses.

One of the many fingers pointed for the cause of the financial crisis and ultimate collapse of the housing market was toward the rating agencies -- Standard & Poor's, Fitch Ratings and Moody's Investor Services -- for placing top-notch ratings on ultimately risky securities. Cuomo's probe suggests he wants to look into whether the ratings agencies were at least partially duped by the large banks named, according to

The New York Times

, which has delved into how the ratings agencies shared modeling information with the banks in past reports.

Interestingly enough, Cuomo's reported list of banks does not include

JPMorgan Chase

(JPM) - Get Report

. The House of Dimon has been arguably one of the best-run banks throughout the financial crisis, but it was also a

big presence

in CDO deals back in the day.

Shares of the largest banks were mostly down in the first hour of trading Thursday.

--Written by Laurie Kulikowski in New York.

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