Holder confirms Wall Street criminal probe

Attorney General Eric Holder has confirmed that the U.S. attorney's office in the Southern District of New York is conducting a criminal investigation of Wall Street.

At a news conference Monday, Holder declined to say whether the investigation involves hedge funds and allegations of insider trading, as news reports have suggested. He would only say the probe by the U.S. attorney's office is very serious and is ongoing.

A week ago the FBI searched the offices of three hedge funds in New York, Connecticut and Massachusetts as part of what outside experts say could turn out to be one of the largest probes in Wall Street history.

Meanwhile, mutual funds' ties to "expert networks" that have been probed as part of an insider trading investigation may undermine efforts by the industry to stem three years of client withdrawals from stock funds.

Janus Capital and Wellington Management were among firms that received requests for information last week as part of an insider trading investigation. None of the companies have been accused of wrongdoing.

The firms are trying to reverse $90 billion in withdrawals from U.S. stock funds since January 2009. Damage from the industry's last run-in with regulators, a series of trading scandals in 2003 and 2004, took years to repair and led to more than $3 billion in fines against more than two dozen firms, including Bank of America, Putnam Investments, Janus and MFS.

"There was reputational damage from that scandal that took a long time to heal," said Burton Greenwald, a fund-company consultant based in Philadelphia. "In an industry that handles people's money and savings, reputation is enormously important."