Obama's financial fraud task force has miles to go in restoring public confidence

You might think it's a bit late in coming, but Attorney General Eric Holder announced a Financial Fraud Enforcement Task Force on Tuesday. Holder will lead the group along with Treasury Secretary Tim Geithner, Housing and Urban Development Secretary Shaun Donovan and Securities and Exchange Commission Chairwoman Mary Schapiro. President Obama established the task force by executive order as an interagency group aimed at strengthening efforts to combat financial crime.

It will initially focus on the types of crime that can be most damaging during this time of economic recovery, including:

  • Mortgage fraud – from the simplest of "flip" schemes to systematic lending fraud in the nationwide housing market.
  • Securities fraud – including traditional insider trading, Ponzi schemes and misrepresentations to investors.
  • Recovery Act fraud – to ensure that the taxpayers' investment in America's economic recovery isn't siphoned away by a dishonest few.
  • Discrimination – the task force will work to ensure that the financial markets work for all Americans and that no one is unfairly targeted based on impermissible characteristics.
Going beyond the bullet points, Attorney General Holder (pictured) certainly said the right things at the press conference announcing this initiative: "The Task Force is designed to strengthen our collective efforts -- in conjunction with our federal, state and local partners -- to investigate and prosecute significant financial crimes relating to the current financial crisis, to recover ill-gotten gains and to ensure just and effective punishment for those who perpetrate financial crimes."

Holder said the group's first priorities will be to "protect borrowers and ensure the integrity of the financial services industry by combating mortgage fraud head-on. We will protect investors and our capital markets by vigorously attacking securities fraud. We will ensure that recipients of federal financial rescue funds do not obtain them through fraud, or use them for improper purposes. And we will make sure that federal stimulus funds are well-spent by vigilantly protecting the integrity of federal procurement and grant processes."

All lofty goals and all definitely needed to ensure that any criminals involved in this financial crisis are exposed. We can all hope by uncovering and punishing these crimes, future crimes will be prevented.

A Coordinated Assault on Mortgage Fraud

Holder does recognize that citizens have lost faith. "Mortgage, securities and corporate fraud schemes have eroded the public's confidence in the nation's financial markets and have led to a growing sentiment that Wall Street does not play by the same rules as Main Street," he said. "Unscrupulous executives, Ponzi scheme operators and common criminals alike have targeted the pocketbooks and retirement accounts of middle-class Americans, and in many cases, devastated entire families' futures."

The greatest progress has been made in the area of mortgage fraud. The FBI is investigating more than 2,800 such cases, up almost 400% from five years ago. The bureau more than doubled the number of agents investigating mortgage scams and created a National Mortgage Fraud Team. It also launched a coordinated state/federal mortgage fraud initiative with state attorneys general from around the country to enhance information-sharing and improve anticrime and civil enforcement efforts.

But even with the advances against mortgage fraud, the big question is: Do Holder and the others in the administration realize that part of the erosion of public confidence can be placed at their doorstep -- as well as the previous Bush Administration's -- for their actions in divvying up money during the financial crisis? Catching Ponzi schemers and insider traders may help restore public confidence in the markets to some extent. But if the questions about how the taxpayers money was spent aren't answered, that faith cannot be fully rebuilt. This administration must still prove that Wall Street won't be favored over Main Street.

Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies and Trading for Dummies.

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