White House announces investigation of subprime mortgage fraud
WASHINGTON — The Obama administration announced Friday a new inquiry to investigate fraud in the mortgage-backed securities market, whose billion-dollar implosion helped trigger the global financial crisis.
Attorney General Eric Holder will head the working group of 55 lawyers, investigators and analysts from the Justice Department and other federal and state agencies tasked with uncovering wrongdoing in the “sub-prime” mortgage-backed securities market and zeroing in on those responsible.
“By bringing our government’s full enforcement resources to bear, I have no doubt that we will improve our ability to recover losses, to prevent fraud, to bring abuses to light, and to hold those who violate the law accountable,” Holder said in a statement announcing the probe.
“That’s what the challenge before us demands, and that’s what the American people deserve.”
Holder, who spoke just three days after President Barack Obama called for prosecution of wrongdoers in the financial meltdown in his State of the Union address, also stressed the new effort “will improve our ability to ensure justice for victims (and) help restore faith in our financial markets and institutions.”
The financial crisis swelled after a bubble in US housing prices popped in 2007 and mortgage-backed securities lost much of their value, sending shockwaves through the global banking system.
US authorities have accused banks of issuing dodgy mortgages to unqualified borrowers and then misrepresenting the quality of the loans when bundling them into complex mortgage-backed securities.
Consumer advocates have argued that Wall Street banks have not been held responsible for actions that caused the financial meltdown and forced many in the United States out of their homes.
“Millions of American families have been harmed by the foreclosure crisis,” Secretary of Housing and Urban Development Shaun Donovan said in the statement, adding the investigation will specifically target “misconduct we know led directly to the financial crisis.”
“These families deserve justice. They deserve relief,” he added.
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