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Federal Probe Targets Banks Over Bonds

"Federal investigators are probing whether a number of Wall Street banks cheated clients in the years following the financial crisis by deliberately mispricing a type of mortgage bond that was central to the economic turmoil, according to people close to the inquiry.

"The investigation is a potential blow to the banks, who are just starting to move on from years of intense scrutiny tied to their roles in the crisis.

"Wall Street's conduct leading up to and during the market convulsions of 2008 already has been closely examined by authorities. The new probe by regulators is the first known wide-ranging examination of mortgage-bond sales by banks in the years that followed.

"In that postcrisis period, when the economy remained shaky and many markets weren't yet active again, banks still held on their books billions of dollars in hard-to-price assets. Regulators are seeking information about whether banks made significant misrepresentations about some of those assets to make deals."

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