Authorities probe Credit Suisse over MBS practices

Bank is second this week to have mortgage sales probed by AG

October 05, 2012 03:00 PM

New York Attorney General Eric Schneiderman

U.S. federal and state authorities have launched a probe investigating Credit Suisse AG’s repackaging and sale of mortgage-backed securities, Reuters reported. Analysts have blamed the sale of mortgage-backed securities for inflating the housing market; that, they said, led to a bubble that subsequently popped, causing the implosion of firms such as Lehman Brothers and Bear Stearns.

The bank under fire, Switzerland’s second-largest, declined to provide comment on the investigation, which sources told Reuters was being conducted by the U.S. Justice Department and the New York state Attorney General.

New York state AG Eric Schneiderman filed a civil fraud case against JPMorgan Chase Monday, over mortgage-backed securities sold by now-defunct Bear Stearns, which JPMorgan absorbed during the financial crisis. Credit Suisse is now the second bank known to be under investigation for its sale of the securities, Reuters said.

The Bear Stearns suit accuses the firm of “systematic abandonment of underwriting guidelines.” [Reuters] Guelda Voien