SEC CDO Probe Is Wide-Reaching, and Now Includes Deutsche Bank and Citigroup

The government has expanded its investigation into the practice of banks selling toxic mortgage debt prior to the economic meltdown to beyond Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS), according to a report from FOX Business Network's Charles Gasparino.

Sources cited in the report close to the Securities and Exchange Commission's investigations say that the agency is looking hard into Deutsche Bank (NYSE: DB) and Citigroup Inc. (NYSE: C), which were two of the biggest traders of packaged mortgage debt.

Gasparino has learned that the SEC initially requested information from all the firms involved in the trading of toxic debt, but then subpoenaed Deutsche Bank and Citigroup for additional documents.

The sources close to the matter also said that the SEC has conducted depositions of executives at Citigroup. The same information has not yet been requested of Morgan Stanley, even though the Justice Department is investigating the firm's sales of CDOs.

The probes into even more Wall Street firms are a sign that the Justice Department’s investigations are wider ranging than what had been originally seen. The SEC defers to the Justice Department in cases that it considers to be significant in nature.

The SEC declined FOX Business' request for comment on the probe into Morgan Stanley, Citigroup and Deutsche Bank, while the firms also were not willing to comment on the situation.

The sources said that as of Wednesday that Morgan Stanley, Citigroup and Deutsche Bank have not received a Wells Notice.

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