On Friday June 17, 2011, 9:35 am
(Reuters) – U.S. regulators could file civil fraud charges against some credit rating agencies, and settle with more Wall Street banks, for their role in developing mortgage-bond deals that helped trigger the financial crisis, the Wall Street Journal reported, citing people familiar with the matter.
The inquiry into the rating agencies broadens the U.S. Securities and Exchange Commission’s (SEC) probe into the sales and marketing of mortgage-bond deals by several financial firms, the paper said.
It said other firms being probed by the SEC include JP Morgan, Citigroup, Morgan Stanley, Bank of America’s Merrill unit and UBS AG.
The SEC was also reviewing the conduct of McGraw Hill’s Standard & Poor’s, and Moody’s Investors Service, owned by Moody’s Corp, on at least two mortgage-bond deals, the paper said.
JP Morgan is expected to settle within weeks allegations related to its sale of a $1.1 billion mortgage-bond investment as the market collapsed in early 2007, the paper said.
JP Morgan declined to comment to Reuters on any settlement of the collateralized debt obligations (CDOs).
Mortgage-backed securities and CDOs were at the heart of the financial crisis. Wall Street banks vacuumed up home loans, often subprime mortgages, and repackaged them into bonds and other securities that were sold with top-notch credit ratings.
When the U.S. housing market crashed, the securities plummeted in value, generating enormous losses for investors around the world.
Last year, Goldman Sachs settled civil fraud charges with the SEC for about $550 million regarding its role in marketing a subprime mortgage product.
The Journal said JP Morgan and most other banks facing fraud allegations are expected to agree to pay about half or less than the $550 million paid by Goldman.
The paper said a Standard & Poor’s spokeswoman declined to comment, and it quoted Michael Adler, a spokesman for Moody’s, as saying: “Although Moody’s is uncertain as to what The Wall Street Journal is referring, we would certainly cooperate with any requests we receive from the SEC.”
Reuters could not immediately reach Standard & Poor’s or Moody’s for comment. The SEC declined to comment.
The SEC is considering whether the credit ratings firms failed to do enough research to be able to rate adequately the pools of subprime mortgages and other loans that underpinned the mortgage-bond deals, the paper said.
The SEC last month sought public comment on proposals that the credit rating agencies needed to reveal more about how they judge financial products and how those ratings perform over time.
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Jim has worked as a Portfolio Manager & Financial Advisor since 1996. In May 2005, Jim founded WHI Financial Services, LLC, WHIFinancial.com, a Registered Investment Advisory firm, with headquarters in Texas. His primary focus is on portfolio management, financial & retirement planning, and financial advisory & insurance services. Jim manages investment portfolios & advises individuals, small to mid-size companies, and non-profit organizations on a variety of financial and business issues.
Prior to founding WHI Financial Services, LLC, Jim worked as a portfolio manager & financial advisor for two international investment firms. From 2001 to 2005, Jim worked with Prudential Securities (merger with Wachovia Securities, now Wells Fargo Financial Advisors), and from 1996 to 2001, he was working with Merrill Lynch. While working with both Wachovia Securities and Merrill Lynch, Jim enjoyed dual responsibilities as a portfolio manager, financial advisor and leader of the Professional Development Program.
Jim's responsibilities as leader of the Professional Development Program included, recruiting, interviewing, training, and overseeing the daily operations of all financial advisors involved in the Professional Development Program. Jim was responsible for managing between 10-20 advisors, while still managing his own client investment accounts.
In addition to his experience in the financial services area, Jim has been involved in several start-up companies. Jim's Philanthropic work includes serving as President/Treasurer of a private foundation established to provide non-profit organizations financial assistance, and Chairman/President of the Believe In Your Dreams Foundation. In 2007, Jim established the Believe In Your Dreams Foundation, a 501(c)3 organization, to help individuals who are suffering from life-altering circumstances beyond their control.
Jim has taught investment, insurance, and credit repair classes through continuing education at universities in CA & TX since 1997. Jim attended the University of Minnesota where his focus was Management & Marketing.
Jim has recently written two books, one called "Your Financial Lifecycle" a book which describes several key investment topics everyone will face throughout their life, and a book titled, "The Truth about Your Credit Score", which defines how credit scores are calculated and how you can increase your credit score, including templates which you can use to send to creditors.
Jim's books can be purchased on Amazon.com, via Author search, or by emailing him directly at JimWigen@GetWealthyStayWealthy.com.
In the Fall of 2011, Jim will be starting his radio show called, The Jim Wigen Show, Teaching You to Get Wealthy & Stay Wealthy. You can hear his shows through streaming audio by visiting JimWigen.com.
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