State Subpoenas Bank of America on Loan Securities

(NewsCore) - Massachusetts' securities regulator on Friday subpoenaed Bank of America Corp. in connection with its involvement in two loan securities that resulted in $150 million in losses for investors.

William Galvin, the Secretary of the Commonwealth, is examining whether Bank of America knowingly overvalued the assets in the portfolios in order to get the loans off its books, according to a statement on Friday.

Galvin's office has been investigating how banks structured and sold a variety of debt products in the run-up to the financial crisis, particularly mortgage-backed securities. The state was aggressive in its push to recoup investor money lost when the auction-rate securities market went bust four years ago.

In an interview on Friday, Galvin said he may seek documents from other banks. "We are definitely interested in other entities."

Bank of America and four other banks agreed on Thursday to pay $25 billion to settle with a variety of state and federal regulators over alleged foreclosure abuses. That settlement leaves the door open for regulators to target the banking industry's securitization practices.

"The question is what did the issuers know at the time of the sales and were the assets being priced truthfully," Galvin said in a statement on Friday.