Published: May 13, 2010 1:23 PM EDT

NEW YORK (AP) - The New York attorney general has launched an

investigation into eight banks to determine whether they misled

ratings agencies about mortgage securities, according to a person

familiar with the investigation.

Attorney General Andrew Cuomo is trying to figure out if banks

provided the agencies with false information in order to get better

ratings on the risky securities, said the person, who spoke on

condition of anonymity because the investigation has not been made


Cuomo's office is investigating Goldman Sachs Group Inc., Morgan

Stanley, UBS AG, Citigroup Inc., Credit Suisse, Deutsche Bank,

Credit Agricole and Merrill Lynch, which is now part of Bank of

America Corp.

Spokesmen from the banks were immediately available to comment.

During the housing boom, Wall Street banks often packaged pools

of risky subprime mortgages together. The securities were then

typically given top-notch ratings and investors purchased them, in

part, because of their high ratings.

The ratings, given out by Standard & Poor's, Moody's Investors

Service and Fitch Ratings, are used as a guide for investors to

judge how risky an investment might be.

As the housing market collapsed and more customers fell behind

on repaying their mortgages, the securities began to fail.

The securities have been widely blamed for exacerbating the

credit crisis and costing investors and the banks themselves

billions of dollars in losses. The ratings agencies have come under

fire for having given such high ratings to securities that soured.

The attorney general's probe comes as federal regulators are

investigating whether some of the banks misled investors when

marketing and selling the securities and other investments that

were tied to mortgages.

The Securities and Exchange Commission charged Goldman Sachs

with fraud over its packaging of mortgage securities. Goldman is

facing a separate criminal investigation into the same securities.

Goldman has denied the charges and plans to defend itself.

Earlier this week it was reported that federal prosecutors are

investigating whether Morgan Stanley misled investors about its

role in a pair of $200 million derivatives whose performance was

tied to mortgage-backed securities.

The increased scrutiny over how banks managed, packaged and

portrayed mortgage securities and derivatives comes as Congress

discusses a major overhaul of financial regulations. Politicians

have said an overhaul would add more transparency to investments

and trading.