Banks are being charged with irresponsible lending after giving loans to people who would never be able to make repayments plus misleading investors over mortgage-backed securities.
According to the New Zealand Herald, Atty Gen Andrew Cuomo has sent subpoenas to several banks, including Bear Stearns, Merrill Lynch and Deutsche Bank.
The banks are being asked to show how they assessed the quality of the home loans underlying derivatives such as mortgage-backed securities and collateralised debt obligations (CDOs), the newspaper says.
Mr Cuomo suggests that the banks creating the derivatives could be in trouble for failing in their legal obligation to ensure that prospectus information on the derivatives being sold was true.
Before this news, much of the market was blaming unscrupulous mortgage brokers and credit rating agencies for the sub-prime crisis but now it seems that banks themselves will not escape investigation.
Meanwhile the superfund set up to rescue structured investment vehicles is facing a shortfall and may be cut back to $50 billion.