After failing to produce any major prosecutions stemming from the housing crisis, an expanded federal task force is planning a new tack, cracking down on financial firms suspected of improperly bundling home loans into securities for investors, officials said Wednesday.
The Obama administration tried to instill confidence in the effort by installing Eric T. Schneiderman, the New York state attorney general who is viewed by liberal groups as a crusader against big banks, as one of the leaders of a new unit within the Financial Fraud Enforcement Task Force. But skeptics still doubted the sincerity of the new effort.
The unit, announced by President Obama in the State of the Union address on Tuesday night, while Mr. Schneiderman looked on from a prime seat behind Michelle Obama, is the latest in a string of efforts undertaken by the administration over the last three years to prosecute crimes related to the financial crisis, bolster the housing market and help homeowners who are suffering under unaffordable mortgages.
Many of those efforts have met with limited success. The Financial Fraud Enforcement Task Force, created in late 2009, seemed little more than “a press release collection agency” being propped up by the Justice Department “to collect examples of investigations or prosecutions that would otherwise have been brought,” said Senator Charles E. Grassley, an Iowa Republican, at a Senate oversight hearing in June.
Officials said the new effort would be more focused than previous interagency programs to tackle the mortgage crisis.
“There have been investigations going on in various states and branches of the federal government,” Mr. Schneiderman said, speaking to reporters in Washington. “We’re now making a concerted effort to pull everything together and move forward aggressively to address these issues.”
Officials said the unit would most likely focus on Wall Street firms, big banks and other entities that many people thought had escaped scrutiny for their role in the housing crisis. The task force will most likely follow the lead of New York and Delaware, which are investigating potential flaws in the creation of mortgage-backed securities that could lead to charges of tax evasion, insurance fraud and securities fraud.
The Delaware attorney general, Beau Biden, has not yet signed on to the new effort. “We are willing to work with any agency that has the same interest in pursuing accountability in the mortgage finance industry,” said Ian McConnell, the director of Mr. Biden’s fraud division, which has joined forces with other states to pursue their own mortgage-related cases. “But any collaboration has to be real and meaningful.”
With only a year left in the president’s term, the task force also has a limited amount of time to produce results.
Mr. Obama told Congress that the new unit would include federal law enforcement officials and state attorneys general and would “expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.”
That sounds much like previous White House efforts, particularly in 2009 when Mr. Obama outlined a new program to strengthen the investigation and prosecution of mortgage fraud, promising more money and people to target “virtually every step of the process, from predatory lending on Main Street to the manipulation on Wall Street.”
But Tuesday’s announcement shifted focus away from yet another faltering effort — an attempt, led by federal officials, to reach a settlement between state attorneys general and the large banks on foreclosure abuses.
Administration officials had tried unsuccessfully to reach a settlement before Tuesday night’s State of the Union address. On Wednesday, one of the crucial players, Kamala D. Harris, the attorney general of California, rejected the most recent terms, saying, “We believe it is inadequate for California.”
Mr. Schneiderman has been one of the most vocal critics of the proposed settlement because he feared it would provide the banks with immunity that would prevent him from a larger investigation into the causes of the crisis. The fact that he was appointed to the new unit reassured him that the proposed settlement would not give the banks a pass, he said Wednesday.
“Obviously, there’s no way that I or that any of the others involved are going to release any of the claims we’re investigating,” he said.
Article source: http://feeds.nytimes.com/click.phdo?i=143f1b8dcebb7c3e005fdbe7f3baf885
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