Holder and Schneiderman provide more details on mortgage fraud task force

The new Residential Mortgage-Backed Securities Working Group that President Obama announced in his State of the Union speech held a press conference today prior to its first meeting. You can read Attorney General Eric Holder's remarks here.

One of the assumptions naysayers threw out initially without any facts was that the unit would not be adequately staffed or funded. AG Holder addressed that issue today:

I am pleased to report that this Working Group has considerable Department resources behind it as it builds on activities that have been underway through the broader Task Force. Currently, 15 attorneys, investigators, and analysts – here at Main Justice and throughout our U.S. Attorneys’ Offices – are supporting the investigative efforts that this Working Group will be focusing on going forward. And the FBI has assigned 10 agents and analysts to work with the group immediately. In the coming weeks, another 30 attorneys, investigators, and support staff from U.S. Attorneys’ Offices will join the Group’s work.

If you had any doubts that this group is serious, take a look at what NY Attorney General Eric Schneiderman said today.

The new federal task force led by New York Attorney General Eric Schneiderman sent subpoenas to the 11 largest financial institutions in the past few days as part of its investigation into possible residential mortgage-backed securities fraud...

Schneiderman said in a press conference Friday that he will be joined by Delaware AG Beau Biden, Massachusetts AG Martha Coakley, Nevada AG Catherine Cortez Masto, California AG Kamala Harris and Illinois AG Lisa Madigan...

"We have jurisdiction to go after every aspect of the mortgage bubble and the crash of the financial market," Schneiderman said. "We have jurisdiction over every MBS issued over the last decade with Delaware and New York joining the group."

Holder said if there is evidence of it, civil and criminal charges will be brought.

But I'd like to highlight one other thing Holder said today:

Over the past three years, we have been aggressively investigating the causes of the financial crisis. And we have learned that much of the conduct that led to the crisis was – as the President has said – unethical, and, in many instances, extremely reckless. We also have learned that behavior that is unethical or reckless may not necessarily be criminal. When we find evidence of criminal wrongdoing, we bring criminal prosecutions. When we don’t, we endeavor to use other tools available to us – such as civil sanctions – to seek justice.

This reminds me of something else President Obama said in the SOTU speech about the roll Congress can play in preventing these kinds of abuses in the first place.

Some financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender. That’s bad for consumers, and it’s bad for the vast majority of bankers and financial service professionals who do the right thing. So pass legislation that makes the penalties for fraud count.

With the players at the table, the resources allocated, and the work begun, I have no doubt that this unit will do everything it can to hold financial institutions accountable where that is possible. But in the end, we also need our legislators to step up to the plate and demonstrate that they will do what's necessary as well.