Wall Street Banks and SEC Near Deal on Toxic Mortgage Investments

U.S. securities regulators are in talks with several major Wall Street banks to settle fraud allegations related to mortgage-bond deals that helped unleash the financial crisis, according to people familiar with the matter.

U.S. securities regulators are in talks with several major Wall Street banks to settle fraud allegations related to mortgage-bond deals that helped unleash the financial crisis. Jean Eaglesham has details.
.The expected settlements, some of which could be reached as soon as next week, collectively mark the biggest attempt by enforcement agencies to hold Wall Street accountable for its role in the subprime mortgage bust.

The cases highlight the aggressive tactics banks used to sell these securities to investors who suffered big losses. They also show how the banks' desire to keep the $1 trillion mortgage securities business going helped fuel the housing bubble.

The Securities and Exchange Commission is aiming to reach a series of settlements with individual firms over the sales of the investments, rather than a big industrywide deal, according to people familiar with the matter.

The settlements are expected to vary significantly among banks—but few, if any, are expected to surpass the $550 million penalty that Goldman Sachs Group Inc. paid last year to settle allegations that it misled investors in a mortgage-bond investment called Abacus 2007-AC1. That penalty was the largest ever paid by a Wall Street firm to settle SEC charges. Goldman didn't admit or deny the allegations.