Feds Investigate Banks Over Subprime Lending
Bear Stearns, Goldman Sachs and Morgan Stanley said Tuesday that government investigators are seeking information from them about their subprime mortgage activities.
Separately, FBI officials said they had opened investigations into 14 corporations as part of a crackdown on improper subprime lending but it was not immediately clear if the disclosures by the three banks were linked to the FBI probes.
Bear Stearns said it was cooperating with requests from government entities and regulators for information relating to subprime mortgages, mortgage securitizations, collateralized debt obligations and synthetic products tied to subprime mortgages.
Goldman said it was cooperating with similar requests related to securitizations, collateralized debt obligations and synthetic products tied to subprime mortgages.
Morgan Stanley , meanwhile, said it was responding to subpoenas and information requests from governments and regulators concerning subprime and non-subprime mortgages.
The investment banks disclosed the various requests and subpoenas in their respective annual reports filed with the U.S. Securities and Exchange Commission Tuesday.
Morgan Stanley also said it was a defendant in lawsuits over its role as an underwriter of preferred stock offerings for mortgage lenders New Century Financial and Countrywide Financial .
New Century is liquidating in bankruptcy. Countrywide agreed on Jan. 11 to be acquired by Bank of America .
Subprime mortgages go to people with poor credit. The U.S. housing crisis has caused dozens of mortgage lenders to go out of the business in the last year, and led to more than $100 billion of write-downs at banks worldwide.
Bear Stearns, Goldman and Morgan Stanley are among 21 banks sued on Jan. 10 by the city of Cleveland. The city alleges that fee-hungry banks created a foreclosure crisis by offering mortgages that borrowers couldn't afford but which could be packaged into securities that investors could buy.
Goldman has been the only major Wall Street bank so far to escape major damage from the turmoil, posting a $3.22 billion fourth-quarter profit. Morgan Stanley, in contrast, suffered a $3.59 billion fourth-quarter loss from continuing operations,while Bear Stearns' quarterly loss totaled $854 million.
The FBI has opened investigations into 14 corporations as part of a crackdown on improper subprime lending, agency officials said Tuesday.