New initiative will coordinate probes of mortgage meltdown
The Obama administration’s new effort to investigate the causes of the nation’s mortgage meltdown will focus on coordinating the often overlapping state and federal investigations and on holding accountable those whose misconduct led to the global financial crisis.
A team of 55 attorneys, agents and analysts will be assembled quickly to try to speed up existing probes and launch new ones into the highly risky mortgage-backed securities that fell apart, Justice Department officials said Thursday.
Two other major goals of the effort are to get money back for those hurt by the collapse of the mortgage-backed securities market and to provide relief for homeowners still struggling to recover from the subsequent recession.
The joint federal and state initiative, which President Obama announced in his State of the Union address Tuesday, will target wrongdoing by financial firms and seek criminal charges against individuals who violated the law, senior Justice Department officials said.
“This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in his address.
Liberal activists and some Democratic lawmakers have been pressing Obama for months to launch a broader investigation into the causes of the financial crisis.
U.S. Atty. Gen. Eric Holder and New York Atty. Gen. Eric Schneiderman will unveil the special working group Friday in Washington.
Schneiderman has been one of the most aggressive officials in investigating the mortgage crisis. Illinois Atty. Gen. Lisa Madigan also has joined the group, and federal officials anticipate adding other state attorneys general.
A spokesman for California Atty. Gen. Kamala D. Harris said she was “happy to support” the effort in any way she could. Harris already has her own 50-person task force to investigate mortgage fraud.
The new initiative will be part of the existing Financial Fraud Enforcement Task Force, which the administration created in 2009 to better coordinate federal efforts to crack down on violations, such as Ponzi schemes, insider trading and investment scams.
The latest effort grew out of the realization that there was a lot of overlap in various federal and state investigations into the packaging of mortgages into securities and a need for better coordination among the states and the federal government.
Schneiderman will lead state officials working with the unit, called the Residential Mortgage-Backed Securities Working Group.
“We’re now making a concerted effort to pull everything together and move forward aggressively to address these issues,” Schneiderman said.
Also co-chairing the group will be Assistant Atty. Gen. Lanny Breuer, who heads the Justice Department’s criminal division; Assistant Atty. Gen. Tony West, who leads the department’s civil division; Robert Khuzami, enforcement director for the Securities and Exchange Commission; and U.S. Atty. John Walsh in Colorado.
The working group also will include officials from the Department of Housing and Urban Development, the Consumer Financial Protection Bureau, the Treasury Department and the FBI.
The working group will start with a staff of 25 — 15 civil and criminal lawyers and 10 investigators, including FBI agents — with a goal of assembling a team of 55 “in very short order,” said the officials, who requested anonymity because they were not authorized to speak publicly before the official announcement.
The officials would not say how much money would be spent on the effort but promised “very significant resources” would be deployed.
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