The probe into mortgage-related faulty practices by major
global banks continues. The Federal regulators now have the likes
Deutsche Bank AG
Goldman Sachs Group, Inc.
JPMorgan Chase & Co.
The Royal Bank of Scotland Group plc
) under scrutiny. The legal investigators are now delving into
the deliberate misrepresentations by these big shots related to
risky assets post financial crisis.
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The Securities and Exchange Commission (SEC) and the special
inspector general for the Troubled Asset Relief Program (SIGTARP)
are conducting the investigation into the banks. Incorporated in
2008, SIGTARP was established to prevent fraud linked to the
Troubled Asset Relief Program (TARP). SIGTARP is drawn in because
the banks under investigation are believed to have sold
residential mortgage-backed securities to firms, which were
rescued by the bailout money during the financial crisis.
Regulatory authorities are investigating the sale of
misrepresented residential mortgage-backed securities by these
banking biggies. The investigation pertains to the risky assets
these banks sold to hedge funds and investment companies, after
the financial crisis, between 2009 and 2011.
Investors in mortgage-backed securities primarily depend on
traders' information on the prices paid and commissions charged.
Any misinterpretation by a trader can influence the decision to
buy or sell these securities.
The probe generally focuses around whether traders, taking
advantage of macroeconomic uncertainty, bought or sold
residential mortgage-backed securities at artificial prices.
Big Blow to Banks
The big global banks are already enduring the softness in the
broader economy and fundamental pressure on the banking sector.
Plus, they are reeling under penalties and fines from
The latest investigation is of course a big blow to these banks.
But with regulators coming down hard upon the suspected
wrongdoers, investors should be well placed for compensation.