Deutsche Bank

New York Attorney General Andrew Cuomo is investigating whether eight banks misled ratings agencies to inflate the grades of certain mortgage securities, reports in the US media said Thursday.

Late Wednesday, the attorney general's office notified the banks of the investigation, according to a report on the New York Times website.

Part of a larger securities probe

The investigation is part of a larger probe by US authorities questioning the business practices of a range of financial firms whose clients bought mortgage securities in the years leading to the collapse of the housing market in 2008.

At the heart of that collapse - which triggered the global financial meltdown - is a question of whether or not ratings agencies inflated the debt ratings on mortgage securities that were the foundation of complex and far-reaching investment vehicles.

The inquiry suggests Cuomo thinks the agencies may have been tricked by one or more of the targets of his probe, media reports said.

In addition to Deutsche Bank, those targets include Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Credit Agricole and Merrill Lynch, which is now owned by Bank of America.

Cuomo's office is reportedly working with together with the Securities and Exchange Commission in the preliminary criminal probe.

Lawmakers want aggressive action

Standard & Poor's, Fitch Ratings and Moody's Investors Service were the companies that rated the mortgage deals, the report said. The agencies have taken flack for overstating the quality of mortgage securities that later lost value in the wake of the housing collapse.

Lawmakers are urging prosecutors to be more aggressive in their investigation of the financial crisis. The latest investigation remains in its preliminary stages, a report in the Wall Street Journal noted, with prosecutors gathering evidence and not yet issuing any criminal subpoenas.

jen/Reuters/AFP/dpa
Editor: Nancy Isenson