Jan 30, 2008
Fourteen companies, including some of the world's largest banks, are being investigated over possible accounting fraud, improperly securing loans and insider trading during the sub-prime mortgage scandal.
The FBI said yesterday that it had opened criminal investigations into improper lending in the American housing market.
Neil Power, head of the FBI's economic crimes unit, told journalists that the investigation includes the companies that securitised the loans and investment banks that bought those products, as well as the developers and sub-prime lenders.
"We're looking at the accounting fraud that goes through the securitisation of these loans," said Power.
The FBI did not name the companies it is investigating.
Several of the world's largest banks separately revealed yesterday that they are cooperating with official investigations. Bear Stearns, Goldman Sachs and Morgan Stanley all announced, via official filings to the US Securities and Exchange Commission, that government investigators have asked for information about their sub-prime lending practices.
According to Reuters, Swiss bank UBS - which today unveiled new sub-prime losses - is also being investigated by the FBI.
The sub-prime crisis broke last year, after billions of dollars of home loans were made to people with poor credit history or little income. The mortgages were initially available at attractively low rates, but when these "teaser rates" ended many borrowers found they were unable to keep up with the payments.
These sub-prime mortgages were then bundled together with other loans and sold on to other financial institutions - often with a high credit rating.
Once the US housing market began to slide, banks began admitting that they had incurred large losses - prompting the credit crunch, as bankers became increasingly unwilling to lend to each other.
It is estimated that more than $100bn (PS50bn) was been wiped off the balance sheets across the financial sector, in losses and asset writedowns. Share prices have also fallen heavily.
The SEC is already conducting a clutch of civil investigations into the scandal.
Some US states have launched their own legal action. Yesterday, Connecticut state attorney general Richard Blumenthal said his office has issued subpoenas to all major rating agencies and bond insurers in a widening probe of industry practices related to the sub-prime mortgage crisis.
He said this includes MBIA and Ambac, the two monoline insurers who guarantee municipal loans whose shares plunged last week over concern they do not hold enough capital to guarantee their ratings, after getting caught in the sub-prime chaos.
Blumenthal also told Reuters that Connecticut was cooperating with the state of New York over its investigation.
(c) 2008 The Guardian
Join Us: News for people demanding a better world
Common Dreams is powered by optimists who believe in the power of informed and engaged citizens to ignite and enact change to make the world a better place. We're hundreds of thousands strong, but every single supporter makes the difference. Your contribution supports this bold media model—free, independent, and dedicated to reporting the facts every day. Stand with us in the fight for economic equality, social justice, human rights, and a more sustainable future. As a people-powered nonprofit news outlet, we cover the issues the corporate media never will. Join with us today! |
Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.
Fourteen companies, including some of the world's largest banks, are being investigated over possible accounting fraud, improperly securing loans and insider trading during the sub-prime mortgage scandal.
The FBI said yesterday that it had opened criminal investigations into improper lending in the American housing market.
Neil Power, head of the FBI's economic crimes unit, told journalists that the investigation includes the companies that securitised the loans and investment banks that bought those products, as well as the developers and sub-prime lenders.
"We're looking at the accounting fraud that goes through the securitisation of these loans," said Power.
The FBI did not name the companies it is investigating.
Several of the world's largest banks separately revealed yesterday that they are cooperating with official investigations. Bear Stearns, Goldman Sachs and Morgan Stanley all announced, via official filings to the US Securities and Exchange Commission, that government investigators have asked for information about their sub-prime lending practices.
According to Reuters, Swiss bank UBS - which today unveiled new sub-prime losses - is also being investigated by the FBI.
The sub-prime crisis broke last year, after billions of dollars of home loans were made to people with poor credit history or little income. The mortgages were initially available at attractively low rates, but when these "teaser rates" ended many borrowers found they were unable to keep up with the payments.
These sub-prime mortgages were then bundled together with other loans and sold on to other financial institutions - often with a high credit rating.
Once the US housing market began to slide, banks began admitting that they had incurred large losses - prompting the credit crunch, as bankers became increasingly unwilling to lend to each other.
It is estimated that more than $100bn (PS50bn) was been wiped off the balance sheets across the financial sector, in losses and asset writedowns. Share prices have also fallen heavily.
The SEC is already conducting a clutch of civil investigations into the scandal.
Some US states have launched their own legal action. Yesterday, Connecticut state attorney general Richard Blumenthal said his office has issued subpoenas to all major rating agencies and bond insurers in a widening probe of industry practices related to the sub-prime mortgage crisis.
He said this includes MBIA and Ambac, the two monoline insurers who guarantee municipal loans whose shares plunged last week over concern they do not hold enough capital to guarantee their ratings, after getting caught in the sub-prime chaos.
Blumenthal also told Reuters that Connecticut was cooperating with the state of New York over its investigation.
(c) 2008 The Guardian
Fourteen companies, including some of the world's largest banks, are being investigated over possible accounting fraud, improperly securing loans and insider trading during the sub-prime mortgage scandal.
The FBI said yesterday that it had opened criminal investigations into improper lending in the American housing market.
Neil Power, head of the FBI's economic crimes unit, told journalists that the investigation includes the companies that securitised the loans and investment banks that bought those products, as well as the developers and sub-prime lenders.
"We're looking at the accounting fraud that goes through the securitisation of these loans," said Power.
The FBI did not name the companies it is investigating.
Several of the world's largest banks separately revealed yesterday that they are cooperating with official investigations. Bear Stearns, Goldman Sachs and Morgan Stanley all announced, via official filings to the US Securities and Exchange Commission, that government investigators have asked for information about their sub-prime lending practices.
According to Reuters, Swiss bank UBS - which today unveiled new sub-prime losses - is also being investigated by the FBI.
The sub-prime crisis broke last year, after billions of dollars of home loans were made to people with poor credit history or little income. The mortgages were initially available at attractively low rates, but when these "teaser rates" ended many borrowers found they were unable to keep up with the payments.
These sub-prime mortgages were then bundled together with other loans and sold on to other financial institutions - often with a high credit rating.
Once the US housing market began to slide, banks began admitting that they had incurred large losses - prompting the credit crunch, as bankers became increasingly unwilling to lend to each other.
It is estimated that more than $100bn (PS50bn) was been wiped off the balance sheets across the financial sector, in losses and asset writedowns. Share prices have also fallen heavily.
The SEC is already conducting a clutch of civil investigations into the scandal.
Some US states have launched their own legal action. Yesterday, Connecticut state attorney general Richard Blumenthal said his office has issued subpoenas to all major rating agencies and bond insurers in a widening probe of industry practices related to the sub-prime mortgage crisis.
He said this includes MBIA and Ambac, the two monoline insurers who guarantee municipal loans whose shares plunged last week over concern they do not hold enough capital to guarantee their ratings, after getting caught in the sub-prime chaos.
Blumenthal also told Reuters that Connecticut was cooperating with the state of New York over its investigation.
(c) 2008 The Guardian
We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.