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The New York attorney general has begun an investigation into eight banks to determine whether they provided misleading information to agencies that rate mortgage securities, The New York Times reported on Thursday.

WASHINGTON, May 12 (Reuters) – The U.S. Senate on Wednesday voted to end mortgage kickbacks and so-called “liar loans,” two lending practices that played a role in the meltdown of the subprime mortgage market.

In a pay-to-play game ratings agencies were trusted by Americans until problems becmae obvious in 2007. An SEC investigation of ratings agencies could turn up some interesting facts. While the Dow Jones Industrial Average rose almost 4 percent Monday, share prices for Moody’s Corp. tumbled 7.19 percent as investors digested confirmation of a Securities and Exchange Commission investigation into the credit-rating agency.

A Democratic official familiar with Senate banking negotiations says a provision that would force banks to spin off their derivatives operations will be incorporated into sweeping regulatory legislation despite Obama administration misgivings.

Here’s the written testimony of Eric Kolchinsky before the Senate Permanent Subcommittee on Investigations last week who, during the majority of 2007, was the Managing Director in charge of the business line which rated sub-prime backed CDOs at Moody’s Investors Service.

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