The Wall Street Journal reports that U.S. attorney in New York’s Eastern District in Brooklyn has launched a preliminary investigation:
Federal criminal prosecutors in New York are investigating whether UBS AG misled investors by booking inflated prices of mortgage bonds it held despite knowledge that the valuations had dropped, according to people familiar with the matter.
Some details:
Federal criminal prosecutors in New York are investigating whether UBS AG misled investors by booking inflated prices of mortgage bonds it held despite knowledge that the valuations had dropped, according to people familiar with the matter.
The SEC has also been looking into inconsistencies in how similar securities were marked for different purposes, for example, in firm trading accounts versus as collateral for margin loans. It is much easier for prosecutors to make a case over glaring and repeated inconsistencies than having experts argue against firms’ pricing practices.
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I would like to see what they find in their discovery, especially any emails leading to the insurance regulators of the monolines, such as Dinallo’s office in New York. It seems to me that thereis collusion among those regulators, the banks, the rating agencies and the monolines, violating the disclosure rules of the SEC, thereby harming investors to the tune of billions. Right now, I imagine Dinallo is telling people to hold off disclosing more losses, because we may have a deal soon. If correct, this line of reasoning violates numerous laws. Hopefully, someone has the guts to follow the trail and hold all of those parties, including the regulators, accountable. There has been inadequate disclosure in this area for a long time, and that is still the fundamental issue that has led to the problem.