Eight US banks being probed

The New York attorney general has started an investigation of eight banks to determine whether they provided misleading information to rating agencies in order to inflate the grades of certain mortgage securities, according to two people with knowledge of the investigation. 

    The investigation parallels federal inquiries into the business practices of a broad range of financial companies in the years before the collapse of the housing market. 
    This one expands the scope of scrutiny to the interplay between banks and the agencies that rate their securities. 
    The agencies themselves have been widely criticised for overstating the quality of many mortgage securities that ended up losing money once the housing market collapsed. The inquiry by the attorney general of New York, Andrew M. Cuomo, suggests that he thinks the agencies may have been duped by one or more of the targets of his investigation. 
    Those targets are Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Crédit Agricole and Merrill Lynch, which is now owned by Bank of America. The companies that rated the mortgage deals are Standard & Poor's, Fitch Ratings and Moody's Investors Service. Investors used their ratings to decide whether to buy mortgage securities. 
    Cuomo is also interested in the revolving door of employees of the rating agencies who were hired by bank mortgage desks to help create mortgage deals that got better ratings than they deserved, said the people with knowledge of the investigation, who were not authorised to discuss it publicly. 
    Contacted after subpoenas were issued by Cuomo's office, representatives for Morgan Stanley, Credit Suisse, UBS and Deutsche Bank declined to comment. Other banks did not immediately respond to requests for comment. NYT TIMES SERVICE