14 May 2010

Probe into big banks widens

1:57 pm on 14 May 2010

Some of Wall Street and Europe's biggest banks are again under scrutiny, as US authorities investigate the toxic mortgage-linked deals that were one of the main causes of the financial crisis.

Eight banks are facing a US investigation into the rating of their mortgage products, the BBC is reporting.

New York Attorney General Andrew Cuomo is looking at whether the relationship between the banks and credit rating agencies was manipulated to gain a better ratings for risky securities.

The banks under investigation are believed to include Goldman Sachs and Morgan Stanley.

Bad US mortgage debt was one of the main causes of the financial crisis.

Much of the bad US mortgage debt was repackaged into wider debt offerings and then resold around the world.

This spread the problem of bad debt to other banks when many US households began to default on their mortgage payments.