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INVESTMENT BANKS HIDING SUBPRIME LOSSES? THE SEC WANTS TO FIND OUT.

Analysts and investors alike have wanted to know how some of Wall Street's top investment banks have been able to withstand the ongoing onslaught of subprime losses as many of the largest firms have reported few if any in recent months amidst increasing investor losses that have forced some lenders into bankruptcy. According to the Wall Street Journal, now the SEC wants to know too.

In what is being labeled by many firms as a routine check-up, the SEC has indicated it plans to analyze the records of five of Wall Street's biggest investment banks to determine if and how they are treating losses.

A sign of things to come? In June, Bear Stearns faced a preliminary inquiry from the SEC as to a failing hedge fund it managed and why it restated results from a sister fund. Both funds, which invested in subprime mortgage loans, suffered significant losses in recent periods as default rates continued to rise.

For the moment, investment banks and hedge funds investing in subprime mortgages and collateralized-debt obligations appear to be in the regulators' cross-hairs.

 

Full post as published by OverRegd - Securities Regulation and Litigation Blog on August 10, 2007 (boomark / email).