New York Attorney General Andrew Cuomo has launched an investigation on eight Wall Street banks following allegations that they provided misleading information to numerous ratings agencies in order to secure favourable rating on mortgage securities.

Information obtained by AAP from an anonymous source listed the following banks currently under scrutiny by Mr Cuomo's office: Goldman Sachs Group Inc, Morgan Stanley, UBS AG, Citigroup Inc, Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch, which has been absorbed by the Bank of America Corp.

Wall Street investors usually rely on ratings released by the likes of Standard & Poor, Moody's Investors Service and Fitch Ratings prior to purchase of the traditionally mortgages securities, which were offered by New York banks in a suite of risky subprime pools during the housing boom.

Such securities offerings almost automatically elicit thumbs up approvals from these top rating agencies and are eventually snatch up by investors who were enticed by their high ratings, yet they begun crumbling when the property market collapsed and investors started defaulting on mortgage repayments.

Analysts are pointing to the securities as playing a big role in further aggravating the credit crisis and subsequently wiping out billions of dollars of investors and even bank monies while rating agencies were criticised for giving out high marks that eventually flopped.

In launching his investigation, Mr Cuomo is trying to unearth the possibility that the eight banks being investigated willingly misled and duped unsuspecting investors when securities and other investments were marketed to them, which are also packaged with mortgages.

The US Securities and Exchange Commission has earlier filed a suit against Goldman Sachs for allegations of fraud on its packaged mortgage securities, which the bank has vehemently denied while facing at the same time a parallel criminal investigation on the same securities issue.

Also, US federal prosecutors are looking into allegations that Morgan Stanley lied to its investors about its role on a couple of $US200 million or $A223.59 million investment derivatives whose performances were linked to mortgaged-based securities.

In reaction to the financial controversy, US legislators are calling for a major facelift of the country's financial regulations in order to strip investment securities of any cloak of deceptions and give investors the transparency they need to evaluate investment and trade prospects.

Congressional hearings are being planned as well, amidst escalating concerns over how banks are managing, packaging and portraying their mortgage securities and derivatives to attract prospective investors, as representatives from all concerned banks were not immediately available when sought for comments.