NY AG Opens Probe Into Mortgage Loan Packaging In Banks' Securities-Peddling Operations

The Wall Street Journal reports:

• New York Attorney General Eric Schneiderman has opened an investigation into the packaging of mortgage loans into securities, in the latest sign of increased scrutiny of the mortgage industry.
• Mr. Schneiderman will hold meetings with executives of several major banks, including Bank of America Corp., Morgan Stanley and Goldman Sachs, according to people familiar with the investigation. He intends to discuss securitization of mortgage loans and other mortgage practices and has requested related documents from the firms, these people said. The meetings over securitization are expected to happen in the coming week.

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• Mr. Schneiderman, who took office this year, appears to be continuing in the aggressive footsteps of his predecessors, Andrew Cuomo and Eliot Spitzer. They have a powerful legal tool at their disposal. The 1921 Martin Act, revived by Mr. Spitzer as a weapon against Wall Street, is seen as one of the most potent prosecutorial tools against financial fraud.
• The sweeping definition of fraud in the Martin Act doesn't require prosecutors to prove intent to defraud, in contrast to federal securities laws. The act has been used to prosecute Wall Street firms for securities manipulation, improper allocation of initial public offerings of stock and misleading stock research on Wall Street.

For more, see New York AG Probes Banks Over Mortgage Securities (requires paid subscription; if no subscription, TRY HERE; or GO HERE, then click appropriate link for the story).