FBI and SEC Probing Banks
September 25, 2008
Speaking before the Senate Banking Committee, SEC Chairman Christopher Cox said commercial banks and broker dealers who sold subprime mortgage backed securities are also being looked at.
“We are investigating whether mortgage lenders properly accounted for the loans in their portfolios, and whether they established appropriate loan loss reserves,” he told the committee.
The Securities and Exchange Commission revealed Tuesday that it has 50 pending subprime related investigations involving residential lenders, investment banking firms, credit rating agencies, and other players involved in the securitization process.
The agency, which is responsible for overseeing bond disclosures on publicly registered securities, said it is investigating whether lenders adequately disclosed the risk profiles of the mortgages they were securitizing.
In late 2006 Lewis S. Ranieri, the co-inventor of the MBS, criticized the SEC in a speech at the National Press Club, saying the agency needs to play a central role in forcing issuers to increase disclosures on bonds collateralized by nontraditional residential loans. At the time, Mr. Ranieri told National Mortgage News that “this isn’t an indictment of the SEC,” but added that “the transparencies are not what they should be.”
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