New York Investigates Wall Street Banks

Jan 12th, 2008 @ 4:15 PM by Alden Smith

When you dig deeper and deeper into the sub prime crisis, you begin to see a pattern emerge.  Much of the crisis, it seems, stems from the fact that many people involved have withheld information and not been exactly truthful in their disclosures.

So it is in New York, where investigators are curious to know why some Wall Street banks withheld or did not disclose vital investor information on packaged mortgages sold as securities.  New York attorney general Andrew M. Cuomo opened investigations last summer, and wants to know why these Wall Street banks did not disclose the risk involved when investing in securities that were a package of high risk mortgages.  The investigations centers around exceptions, a high risk loan that doesn’t meet even the lax credit standards of sub prime mortgage companies and the Wall Street firms. Details of these exceptions were not disclosed to ratings agencies or investors, giving them a pig in a poke.  Billions of dollars of exception loans and other sub prime debt mortgages were allegedly generated by the banks.

The NBC Nightly News reported this evening that many bankers feel the people who have asked for these loans are responsible, and that it is their responsibility to read the fine print of such loans and make an intelligent decision.  Others look at this as the mortgage companies themselves being to blame for allowing these loans to happen.  They claim that the lender should know whether a person is capable of making monthly mortgage payments.  Yet many lenders chose to go ahead with these loans any way.

There is no real one person to blame for this.  Mortgage lenders are in the business of making money, no matter how unscrupulous they might be.  And people that want to get into their dream home will do just about anything to get there.  Now, we see a mess that is putting the hurts on the economy.  Who will pay in the end?