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State Street Bank Slapped With Wells Notice

The formerly "clean" bank wasn't so squeaky clean after all. State Street Bank, which has largely remained above the fray, was served with a so-called Wells Notice by the SEC for potential civil violations.

The bank is being charged with selling risky and unsuitable mortgage products to individual investors in 2007. This has since emerged as one of the "dirtier" businesses around, although most people didn't feel that way two years ago.

Does the SEC have a case? The evidence (so far, at least) is sketchy. And it may hinge on application of the law; our understanding of mortgage securities has taken a quantum jump in two years. In theory, the law that is supposed to be applied is the law that prevailed at the time of the alleged crime. But memories are short, and in actual practice, the law may be applied as it is understood today.

Then, again, the SEC may just be firing a warning shot at a well-regarded bank as an example to others. And that would not be the worst thing in the world.