WASHINGTON — A new law enforcement group examining securities fraud from the housing bubble and financial crisis has already issued civil subpoenas to 11 financial companies for information related to their actions in the market for residential mortgage-backed securities, Attorney General Eric H. Holder Jr. said Friday.
President Obama announced the new group in his State of the Union address on Tuesday, saying it would “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.”
At a news conference Friday, Mr. Holder said the group would be treading on different ground than that already covered by the Securities and Exchange Commission and other regulatory agencies that had previously filed fraud charges against sellers of mortgage-backed securities.
“We are wasting no time in aggressively pursuing any and all leads,” Mr. Holder said. “In sending out those subpoenas, we consulted with the S.E.C. in making a determination as to where they should go.” Officials would not say which companies received the subpoenas.
“We are not going to be looking at the same things they are examining,” he added. “We’re going to be working with them but looking at a separate group of institutions.”
The group, known as the Residential Mortgage-Backed Securities Working Group, is part of the Financial Fraud Enforcement Task Force, an interagency outfit created by Mr. Obama in 2009 to prosecute financial crimes.
Despite three years of work by that task force, however, public sentiment still holds that few if any of the real perpetrators of the housing bubble and financial crisis have been held accountable.
Eric Schneiderman, the New York attorney general, who is a co-chairman of the working group, said that having many different law enforcement groups working together “enables us to go places where each of us individually could not go.” For example, he said, “having the I.R.S. on the team opens up the possibility of looking into tax issues that hadn’t existed before.”
In addition, the New York State Martin Act, which gives the attorney general broad powers to elicit information during investigations, “is more flexible than federal securities laws,” Mr. Schneiderman said. The New York and Delaware attorneys general also have jurisdiction over the trusts that hold the mortgages that underlie the mortgage-backed securities, making them “the bricks and mortar of this entire structure.”
By coordinating their efforts, group members might be able to share documents and information that usually would be in individual agency silos, Mr. Holder said.
Although some prohibitions exist on sharing federal grand jury information, he added, “there are ways in which we can structure these investigations so that I don’t think grand jury prohibitions on the federal side will prevent us from sharing necessary information with our state partners.”
Shaun Donovan, the secretary of housing and urban development, whose agency is also part of the antifraud group, said its priorities also would include getting some financial relief to homeowners whose investments had been hurt by manipulations in the market for mortgage-backed securities.
A “fundamental principle” of the effort, Mr. Donovan said, is that “there is relief also for those homeowners” whose loans underlie the mortgage-backed securities. “It would be a tragedy,” he added, “if investors were made whole but homeowners who were wronged as well” continued to suffer.
Mr. Donovan said that a separate settlement being worked out between state attorneys general and mortgage servicing companies would not thwart the new group’s investigations, even if the settlement released companies from further law enforcement efforts related to mortgage servicing.
“We would not be standing here today if we were not absolutely confident,” Mr. Donovan said, adding that any releases being contemplated “are narrow enough to allow us to go forward aggressively.”
Source: New York Times
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