New York Attorney General Andrew Cuomo Probes Relationship Between Wall Street Banks and Ratings Agencies

May 13, 2010— -- New York State Attorney General Andrew Cuomo has launched an investigation into eight banks to determine if they influenced the ratings agencies that were supposed to give independent advice and protect investors from bad products.

A source close to the investigation today called it a "troubling relationship," a clear case of "hear no evil, see no evil" between and the agencies that are supposed to rate them.

Now, New York Attorney General Andrew Cuomo wants to know: Did the banks provide false information to the agencies, or where those banks and rating agencies, in some ways, in on it together?

The investigation takes aim at eight major banks, including Goldman Sachs, Morgan Stanley, UBS and Citigroup. Also under investigation are ratings agencies Standard & Poor's, Moody's Investors Service and Fitch Ratings.

All of the banks sold bundled mortgages to investors back when the mortgage market was red hot. The bundles that had the highest ratings fetched the highest price.

ABC News has learned the attorney general is now investigating whether some of those banks tried to manipulate the ratings by hiring people away from the ratings agencies to come over to the bank. They offered the employees huge salaries, reportedly up to $1 million.