Bankruptcy

Obama Administration Creates Task Force to Fight Financial Fraud

By Chris Kramer

The White House announced in a press release on November 17th that President Obama has made an executive order to create a Financial Fraud Enforcement Task Force. Part of the reason for the executive order, it seems, is the number and complicated nature of various financial fraud cases related to the current economic crisis.

Sources indicate that the goals of the force are to prevent abuses in the financial sector that could lead to economic turmoil in the future as well as to bring to justice those responsible for the current state of affairs. This task force will reportedly replace the Corporate Fraud Task Force implemented by the Bush administration after the scandal at the Enron Corporation.

The following groups will fall under the wing of the task force:

• Mortgage lenders & modifiers: Groups responsible for initiating and altering the terms of home loans, much maligned for their role in the current crisis, will be under the task force?s watchful eye.
• Securities law: This is the branch of law that regulates money, stocks and bonds.
• Stimulus spending: Government funds intended to perk up the economy, too, will be overseen by this group.
• Government bailout of the financial sector: This especially controversial bailout has been identified specifically as a target for the task force.

Too Much Fraud?

In recent years, growth and innovation in the financial sector (including such innovations as subprime mortgages) have proven to be more than the Securities and Exchange Commission (which is responsible for regulating stocks, bonds and the like) can handle.

And reports indicate that, despite concerns about national security, officials in the FBI and Department of Justice have been shifting resources away from terrorism cases and to financial fraud cases.

The hope, apparently, is that this group will form a more specialized unit, able to deal exclusively with cases of financial fraud.

The Next 30 Days

The Task Force will reportedly hold its initial meeting within the next month. Headed by Justice Department officials, it?s supposed to include help from the Department of Treasury, Department of Housing and Urban Development and the Securities and Exchange Commission, among others.

Geithner: Beyond Prosecution

Treasury Secretary Timothy Geithner has been quoted as asserting that prosecuting fraud cases after the fact is not workable; he apparently sees the Task Force as a comprehensive reform for financial oversight.

Full post as published by The Bankruptcy Blog on November 21, 2009 (boomark / email).