For a separate story (stay tuned!), I spoke yesterday with Rep. Brad Miller (D-NC), a member of the House Financial Services Committee. And while I had him, I asked him about that assembly of housing groups yesterday, all of whom pointed to the Justice Department as the culprit for the lack of progress on investigations from the RMBS working group, the task force supposed to be probing securitization abuses during the housing bubble. I have already expressed skepticism with the idea that the Justice Department is an independent actor in this whole thing, so I asked Miller what he has observed.
Miller, who at one point was a potential choice to be the executive director of the working group, said that he had not personally spoken with anyone involved in the task force since he missed out on the position in late February/early March. But as an interested observer, he made a few points. “It does appear that the task force is really not doing anything that the various agencies weren’t doing already,” Miller said. “They’re just saying they are doing it as part of this task force.”
And Miller added something else, that members of the various agencies associated with the working group have acknowledged this in conversations with members of Congress. Miller cautioned that he hadn’t heard this from agency officials personally, but that other members have. We pretty much knew this; masaccio’s reporting simply from looking at the larger Financial Fraud Enforcement Task Force (the umbrella group in which the RMBS working group lives) showed that they took credit for the settlement with Barclays on rate-rigging the Libor, the guilty plea of Bernie Madoff’s son, and a series of small fry mortgage fraud cases. The task force is just a repository for existing investigations that would have happened already. This is why this question of “resources” is a little bogus. If it’s all based on existing investigations, you can count those engaged simply in doing their jobs as “resources” for the task force. If no new investigations have been opened, there’s no need for new resources.
Miller also noted that the statutes of limitations, at least on criminal fraud claims, have almost certainly run out. “I said a few weeks ago that the clock on the statute of limitations was ticking like Marisa Tomei’s biological clock in My Cousin Vinny,” Miller said. “If there have not been extensions worked out in private negotiations, and if the law is that the statute runs from occurrence rather than discovery, it’s probably the case that most statutes have expired.”
That leaves open the ability to pursue claims under FIRREA, which extends many of the statutes to 10 years and lowers the burden of proof. You cannot bring criminal penalties under FIRREA, but you can sue for significant compensation. Miller said that FIRREA claims would spur a battle royale. “You could seek tens or hundreds of billions in potential damages,” he said. “There would be dozens if not hundreds of defendants. The industry would be lawyered up for those claims. Every case would make the OJ Dream Team look like a public defender two years out of law school.”