Bank probes expanding with new investigation

2010-05-13



Bank probes expanding with new investigation


(Reuters) - U.S. authorities are expanding their probes of past mortgage securities deals, with New York's attorney general opening an investigation into whether eight banks misled rating agencies, a source familiar with the matter said.


New York Attorney General Andrew Cuomo's office on Wednesday served subpoenas on four U.S. banks and four European lenders, the source said.

Cuomo is targeting Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs Group Inc, Morgan Stanley, UBS and Merrill Lynch, now owned by Bank of America, the source said.

The investigation comes as Wall Street and major banks around the world are attracting scrutiny from regulators stemming from transactions that occurred in the run-up to the subprime mortgage meltdown and financial crisis.

The Wall Street Journal on Wednesday reported that U.S. federal prosecutors, working with securities regulators, were conducting a preliminary criminal probe into whether four banks misled investors about their roles in mortgage bond deals.

The banks under early-stage criminal scrutiny are JPMorgan Chase, Citigroup, Deutsche Bank and UBS, the newspaper reported on its website, citing a person familiar with the matter.

The banks have also received civil subpoenas from the U.S. Securities and Exchanges Commission as part of a sweeping investigation of banks' selling and trading of mortgage-related deals, the report said.

A spokesman for JPMorgan told the Journal the bank had not been contacted by federal prosecutors and was not aware of any criminal investigation. The other banks either declined comment or were not immediately available.

美檢察機關對華爾街數家投行展開刑事調查

《紐約 時報》引述消息人士稱，紐約司法部門正調查8間銀行，是否向評級機構，提供誤導資料，提升次按產品評級。

消息人士稱，紐約檢察總長安德魯已向8間華爾街大行，發出傳票，進行調查，涉及銀行包括高盛、摩根士丹利 、花旗、瑞信、德銀、美林 、瑞銀及東方匯理等。

美國 證券交易委員會已民事起訴高盛，涉嫌隱瞞資料，誤導客戶。而紐約今次的調查則擴大至8間銀行，不單只涉及銀行與客戶的交易，而是涉及銀行與評級機構的關係。

當局將集中調查銀行在樓市大跌前，如何向評級機構提供資料，影響他們的按揭產品評級。市場一直批評評級機構，未能正確評價有關次按產品，令投資者受損。 涉及的標級機構包括標普、穆迪及惠譽國際。

'Out of thin air': Synthetic CDOs, inflated the credit bubble

From Marketwatch:
http://www.marketwatch.com/story/out-of-thin-air-synthetic-cdos-pumped-bubble-2010-04-26,

SAN FRANCISCO (MarketWatch) -- The securities at the crux of the Securities and Exchange Commission's case against Goldman Sachs Group Inc. inflated the credit bubble, leaving even more losses when it popped, structured-finance experts and investors said in the wake of the recent civil-fraud charge against the investment bank.

"Derivatives and synthetic securities have been used to create imaginary value out of thin air," George Soros, chairman of $27 billion hedge-fund firm Soros Fund Management, wrote in a column posted on his Web site last week.

"More triple-A CDOs were created than there were underlying triple-A assets. This was done on a large scale in spite of the fact that all of the parties involved were sophisticated investors," he added. "The process went on for years, and culminated in a crash that caused wealth destruction amounting to trillions of dollars. It cannot be allowed to continue."

"Synthetic CDOs should be abolished," Janet Tavakoli, a structured-finance specialist who wrote a book about CDOs in 2003, said in a recent interview. "They're too complex and provide no real benefit. They only existed to game the system or hide losses."

The SEC alleged that Goldman Sachs (GS 147.20, +5.23, +3.68%) didn't tell investors in a synthetic CDO called Abacus 2007-AC1 that hedge-fund firm Paulson & Co. helped structure the deal, and also was betting against it. Goldman and Paulson have denied wrongdoing.

Because they weren't based on real assets, such investments were tricky to value. When the housing market collapsed, the existence of such hard-to-value securities in the financial system caused havoc as counterparties struggled to find out who had lost money.

Fabrice Tourre, the Goldman banker named in the SEC's case, described such problems in a January 2007 email, just as the subprime-mortgage meltdown was gaining steam.

"I'm trading a product which a month ago was worth $100 and which today is worth $93 and which on average is losing 25 cents a day," Tourre wrote, according to recent Goldman disclosures.

"When I think that I had some input into the creation of this product (which by the way is a product of pure intellectual masturbation, the type of thing which you invent telling yourself: 'Well, what if we created a 'thing', which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?') it sickens the heart to see it shot down in mid-flight," Tourre added in the email.

Packaging

Synthetic CDOs sat at the end of a long chain of boom-time transactions that began with the origination of mortgages and other loans. These assets were packaged up by investment banks and sold as asset-based securities, including residential mortgage-backed securities, or RMBS.

CDOs were created by taking pieces of RMBS and other securities, packaging them up again and reselling them.

Demand for such investments was so strong during the credit boom that there weren't enough underlying assets to build new ones. So Wall Street came up with a way of creating CDOs that didn't need actual assets.

The result was synthetic CDOs. These are formed by writing credit-default swaps on bits of RMBS and other asset-backed securities. (These swaps pay out in the event of default.) Once enough of these derivatives contracts were written, investment banks bundled them up into new CDOs and sold them.

More than $110 billion worth of synthetic CDOs were sold in 2006 and 2007, according to Thomson Reuters data.

Raynes, who used to work at Moody's Investors Service (MCO 22.29, +0.53, +2.44%) and co-authored a book on structured finance, said the rating agency put AAA ratings on many parts of CDOs, giving investors the confidence they needed to buy the products.

"You needed a third party to analyze the structures," he added. "That's what provided the value for these deals."

(信報轉載) 高院否決雷曼苦主司法覆核

高院否決雷曼苦主司法覆核 - 2010年5月1日

高等法院昨天拒絕接納之前有雷曼苦主提出的司法覆核申請，證監會對此表示欣慰，而雷曼苦主大聯盟則未決定下一步行動。

證監感欣慰

證監會發言人回應本報查詢時表示，對昨天高院的判決感到欣慰，但目前沒有進一步評論。

雷曼苦主大聯盟召集人陳光譽表示，暫定於下周二與其他雷曼苦主會面，討論下一步的行動，惟現在沒有任何決定。

證監會和金管局去年七月就雷曼迷債事件公布回購方案，以賠償最小百分之六十本金予苦主，換取終止調查迷債事件；同時，金管局不會再向銀行採取任何行動。其中一名拒絕接受回購方案的苦主石麗珊指出，證監會拒絕承擔責任，於三月二十二日要求高等法院批准其司法覆核申請。

至於立法會的雷曼研訊，昨天完成傳召首家銀行的工作。星展銀行（香港）行政總裁葉約德昨天回應議員提問時，否認銷售手法有欺詐成分，強調銷售產品時有經過產品介紹及風險說明。

有議員希望了解金管局去年十一月採取紀律處分星展前僱員的個案，但葉約德表示，該行處理的相關投訴超過二千七百宗，令她忘記個別個案的情況。

立會下周傳召洪丕正

星展香港的三次公開研訊已經結束，立法會研究雷曼兄弟相關迷你債券及結構性金融產品所引起的事宜小組委員會主席何鍾泰說，稍後將傳召葉約德出席閉門研訊，了解該行未能提交部分資料的原因。

下周五的研究將傳召第二家銀行，渣打集團（香港）行政總裁洪丕正和另一名銀行代表將出席。

根據金管局的公布，截至四月三十日，二萬一千六百零二宗雷曼兄弟相關投訴個案中，二千七百八十三宗個案完成詳細調查並正進行紀律程序，另外有一百九十八宗個案仍在調查中■