New Obama housing probe to focus on mortgage-backed securities

By Jim Puzzanghera

Jan. 26, 2012 12 AM PT

Reporting from Washington — The Obama administration’s new effort to investigate the causes of the financial crisis will focus on the toxic mortgage-backed securities that triggered the market collapse, Justice Department officials said Thursday.

A team of 55 attorneys, agents and analysts will be quickly assembled to try to speed up existing probes and launch new ones.

The joint federal and state initiative, which President Obama announced in his State of the Union address on Tuesday, also will aim to file civil suits against financial firms and bring criminal charges against people who violated the law, said senior Justice Department officials.

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 working group, and federal officials anticipate adding other state attorneys general as well.

A spokesman for California Atty. Gen. Kamala Harris said she was “happy to support” the effort in any way she could, but has not committed to join yet. 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 Obama created in 2009 to better coordinate federal efforts to crack down on violations such as Ponzi schemes, insider trading and investment scams.

“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 Tuesday.

Liberal activists and some Democratic lawmakers have been pressing Obama for months to launch a broader investigation into the causes of the financial crisis.

On Thursday, senior Justice Department officials disclosed details of the Residential Mortgage-Backed Securities Working Group.

Schneiderman will lead the effort of state officials working with the unit. Also co-chairing the effort 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.

In addition, the working group will start with a staff of 25 -- 15 civil and criminal attorneys, 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 to speak before the official announcement.

California calls $25-billion mortgage settlement ‘inadequate’

States said to be weighing $25-billion settlement with big banks