In addition to the proposed settlement, there’s news on the Unit on Mortgage Origination and Securitization Abuses front. (As an aside, I don’t know what to call this thing. You could say “Financial Fraud Unit,” but there’s already one of those. The name above is the official title, but it’s a mouthful. You could shorten to “UMOSA,” but that’s an ugly acronym. You could say the “Schneiderman panel,” but it’s not his panel, he’s a co-chair. Welcome to my nightmare.)

Loren Berlin has some details on the staffing levels and resources of this investigation:

The new unit will focus on both the origination and securitization (or packaging) of mortgage loans. The unit will also investigate loans that were sold to, and insured by, government agencies, said Justice Department officials [...]

The investigators will consider a variety of cases, including false statements, mail and wire fraud, and failure to comply with the Financial Institutions Reform, Recovery and Enforcement Act of 1989, established in the wake of the savings and loan crisis. This law empowers investigators to examine wrongdoings going back a decade. Many other mortgage-related laws have statutes of limitations for less than half as long.

Already the new unit has 15 attorneys and 10 investigators, including FBI agents. Once fully staffed, it will employ roughly 55 people, in addition to the five co-chairs, and include a mix of new hires and existing personnel from participating agencies, including the Treasury Department, Consumer Financial Protection Bureau, Internal Revenue Service, Department of Housing and Urban Development and Federal Housing Administration as well as the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. A “significant portion” of the unit will be based in Washington, D.C., though officials anticipate expanding to “at least three or four U.S. attorney offices,” as the cases unfold, said a Justice Department official.

The statute of limitations and jurisdiction issues were key element of why Eric Schneiderman signed on, as I understand it. And we have a better understanding of why this was slotted inside the existing Financial Fraud Task Force: it’s being paid for out of existing funds, so no need to return to Congress for money.

But I’m looking at the staffing levels. 55 people? I know that a lot of this has been gone over, and you can have a more focused investigation, but I thought the whole point was to leverage up the investigation with more man-hours than the New York Attorney General’s office could provide. 55 investigators doesn’t seem like a lot. In the savings and loan crisis there were over 1,000 investigators. Enron alone had 100. Maybe this doesn’t count the investigators on loan from US Attorney’s offices and other agencies (Beau Biden, the Delaware AG who actually has questioned the investigative panel, had staff on their first conference call). But it seems extremely low.

I guess the answer from DoJ would be that they are focusing this investigation on origination and securitization abuses, in other words pre-crisis conduct. Matt Taibbi, in his report on this (which comes down largely where I come down), sees that as Schneiderman’s strategy:

The new Unit on Mortgage Origination and Securitization Abuses will not be investigating the same abuses covered in the foreclosure settlement. When the public thinks about corruption in the housing markets on the part of the big banks, what it mostly thinks of is robosigning and the other mass-perjury issues, which is the stuff targeted in the foreclosure settlement.

But in fact those problems were a tawdry little sideshow to the more serious crimes of the housing crisis [...]

My first thought, when I heard about this deal, was that Schneiderman was deciding to compromise on robosigning and other post-securitization abuses, in exchange for a mandate to go after the much bigger crimes, which took place in the origination/securitization stages.

The securitization offenses were massive criminal conspiracies, identically undertaken by all of the big banks, to defraud investors in mortgage-backed securities. If you’re looking for an appropriate target for a massive federal investigation, one that would get right to the heart of the corruption of the crisis era… well, they picked the right target here.

I’m not sure I agree that foreclosure fraud and servicer abuses should be thrown over in exchange for this securitization stuff – you’re talking about the theft of homes and some of the worst horror stories you can imagine. But that looks to be the decision made. However, in doing that, Schneiderman is getting into bed with a group of folks who have been saying “mortgage fraud is a top priority for this Administration” for the last three years, when their conception of that is going after small-scale operators. The additional resources gained have little interest in the big fish. And there aren’t that many resources, at first glance.

So like Taibbi, I’m skeptical, especially with panel co-chairs who have manifestly failed to do their job throughout the crisis. I hope Schneiderman can leverage his position into some real investigations. Time will tell. Let’s see the results.