Just Another Bad Day Of the Subprime Meltdown
So how bad is it? Take a look at the “Money and Investing” section of the February 8, 2008 Wall Street Journal. The story “Prosecutors Widen Probes into Subprimes” reveals that criminal or regulatory investigations concerning fraud in the subprime market are underway by:
(1) U.S. Attorneys Office for the Eastern District of New York (Brooklyn) – investigating Bear Stearns and UBS;
(2) U.S. Attorneys Office for the Southern District of New York (Manhattan) – newly initiated investigation concerning activities of Merrill Lynch & Co.;
(3) Securities & Exchange Commission – thirty-six investigations involving such biggies as Merrill, UBS, Bear Stearns, Morgan Stanley, and Citigroup;
(4) FBI – investigating 14 companies for accounting fraud and insider trading;
(5) New York Attorney General – has issued subpoenas to Bear Stearns, Deutsch Bank, Morgan Stanley, Merrill Lynch and Lehman;
(6) Massachusetts Secretary of State - has sued Merrill Lynch over mortgage- backed securities sold to a municipality and is now probing Bear Stearns.
And that was just on Page C1! On Page C2, we learn that New York’s Attorney General, Andrew Cuomo, has blasted as mere “window dressing” the proposals of Moody’s and Standard & Poore’s to “improve” the manner in which they rate mortgage related bonds. These rating firms are squirming under heavy scrutiny for having given their highest ratings of creditworthiness to bonds backed largely by loans to uncreditworthy borrowers. And why would they do that? Cynics might suspect it has something to do with the fact that S&P and Moody’s get paid to rate the bonds by the people who issue them. Can you say “conflict of interest”?
Judging by the WSJ, I’d say we are about to enter an era of full employment for white-collar criminal defense lawyers. Times may be tougher for the poor investors who got stuck holding the bag when Wall Street’s tainted investments got sold to Main Street.
Brian N. Smiley
