Is That A Cop Investigating Big Banks?
Courtesy of Karl Denninger at The Market Ticker
May 13 (Bloomberg) — U.S. prosecutors and the Securities and Exchange Commission are cooperating in a preliminary criminal probe into whether banks misled investors about their participation in mortgage-bond deals, the Wall Street Journal said, citing a person familiar with the matter.
The list is a who’s who of the big banks. JP Morgan, Deutsche Bank, UBS, Citigroup, Goldman, Morgan Stanley.
All in all eight banks are being scrutinized by both the toothless SEC but more-importantly Andrew Cuomo, who wields a fairly nasty set of powers through NY’s Martin Act.
Cuomo is investigating whether Goldman, Morgan Stanley, UBS, Citigroup, Credit Suisse, Credit Agricole SA, Deutsche Bank and Bank of America Corp.’s Merrill Lynch misled rating companies to obtain higher ratings, the New York Times said. Cuomo issued subpoenas on Wednesday, the newspaper reported.
Hmmmm… now that’s a good sign.
We know from the public data flow, including testimony before the Congress, that firms did use their knowledge of rating agency models to "tailor" submissions. Whether this rises to the level of intentional deception for the purpose of gaming the system remains to be determined, but that this sort of thing happened isn’t conjecture – it’s admitted fact.
"Changes to prevent it from happening again" are insufficient. Those who were defrauded, if they indeed were, are entitled not only to recompense but to criminal sanction against wrong-doers as a means of dissuading firms and individuals from doing it again.
I’ll believe this is real when I see handcuffs come out.
