Darren Samuelsohn takes a look at the much-maligned securitization fraud task force, which has come under criticism for, well, not doing much of anything since coming into existence. Let’s see how the leaders of the effort have responded to all that criticism.
“People are very angry that the only person who’s been to prison is Martha Stewart,” said Democratic pollster Celinda Lake, referring to the insider trading charges against the home-improvement celebrity [...]
Senior administration officials and New York Attorney General Eric Schneiderman said they’re busy behind the scenes doubling their team to more than 100 federal and state financial experts and drawing on staff in 10 U.S. attorneys offices around the country. Matthew Stegman, an assistant U.S. attorney, has been tapped as the group’s lead coordinator, according to three sources familiar with the task force’s work.
The unit has also delivered more than 20 civil subpoenas, collected more than a million documents and deposed many witnesses as it digs through the work of bankers, mortgage brokers, appraisers and others who from about 2004 to 2007 helped millions of Americans buy homes they couldn’t afford at prices that didn’t match their property values — all while bundling the mortgages into securities for sale to investors.
So all the caterwauling has led to 50 more investigators. The task force delivered something like 12-13 subpoenas on the first day, so in four months they’ve managed to issue 7 or 8 more. A million documents sounds a lot more impressive than it is when you’re talking about mortgages and securitization.
As for Stegman, he’s a bit of an unknown. I could dig up that he worked on a couple mortgage fraud cases with the larger financial fraud task force. These are penny-ante “foreclosure rescue” scams, where people misrepresent themselves to homeowners and take money from them in exchange for empty promises to get them a loan modification. In other words, the crimes Stegman has been working on bear almost no relationship to securitization fraud. It’s like getting a prosecutor who worked on a bank holdup case to work on insider trading.
Anyway, Stegman is a coordinator. As SEC head of enforcement Robert Khuzami made clear the coordinator won’t do any investigating. “Most of the investigative work being done here is not really being done by a staff that belongs to the task force, it’s being done by the individual investigative groups that make up the task force.” The coordinator will run errands and type up lists.
The co-chairs of the task force are asking for patience, saying that complicated cases such as this take time. Advocates are disturbed that it took four months to hire a lead investigator who won’t even be an investigator. And they are disturbed by the other empty promises that have been made on housing. For example, from the article:
Other Obama efforts include a program that’s helped more than 1 million distressed homeowners escape default and foreclosure by lowering monthly payments. The same template has helped nearly 3 million more through other government and private services, a dent into the problem for some 11 million Americans who owe more on their mortgages than their homes are worth.
That’s really an absurd statement. This takes credit for not only every mortgage modification made over the last three years, since this number has been quoted to me, I know that it takes credit for TRIAL modifications, which evaporated a few months down the road and trapped borrowers, forcing them to choose between immediate payment of the difference between the trial loan and the original loan, or foreclosure. How this should be counted as “helping” anyone is bizarre.
I think this assessment by one anonymous source in the story is more accurate:
A government source working on housing issues said the unit is struggling in part because of a lack of commitment from the White House since its roll out in the State of the Union, citing a leadership vacuum since DOJ Associate Attorney General Thomas Perrelli left the Obama administration in February.
“It’s not happening at the level that it should be happening,” the source said. “There’s no person with juice at the federal level that is banging heads and making sure things are happening the way they should.”
Everything else is just PR.
More from Dean Baker on how you would handle this kind of task force if you were serious.