Obama Names Task Force for Financial Fraud

By Lisa Valentine

President Obama just signed an executive order to create a Financial Fraud Enforcement Task Force. The task force, led by the U.S. Justice Department, includes folks from the U.S. Treasury, SEC, CFTC, and Department of Housing and Urban Development (HUD).  The new task force replaces the Corporate Fraud Task Force created in 2002.

Not to leave anyone out or hurt anyone’s feelings, the task force also includes officials from the Department of Commerce, Department of Labor, Department of Education, Department of Homeland Security, Federal Trade Commission (FTC), Federal Deposit Insurance Corporation (FDIC), Social Security Administration, the U.S. Secret Service, FBI, and Small Business Administration. (SBA).

Have we left anyone out? There are other agencies on the list that we neglected to mention to conserve space. Also, other departments, agencies,  or offices may be invited as the President or the Attorney General see fit.

The task force’s mission is to investigate and prosecute “significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets, and recover proceeds for victims.” The task force isn’t as concerned with finding fraud as it is with making sure that criminal charges will be filed if fraud is found. It’s about vindication. It’s sort of the same philosophy espoused by some who support the death penalty – that capital punishment will deter people from killing each other.

It’s also about making sure that the government doesn’t look ineffective or soft in combatting financial crime. The Washington Post mentioned last week’s acquittal of two Bear Stearns hedge-fund managers charged with violating securities laws as the most recent embarrassment for the government. Surely the government doesn’t want to be embarrassed again.

The task force, said HUD Secretary Shaun Donovan, “will build upon many of the inter-agency collaborations already underway.”

Isn’t “inter-agency collaborations” an oxymoron?
 

Summertime Blues

By Lisa Valentine

August is typically a slow time of the year for big news on the regulatory and compliance front as legislators, lobbyists, and everyone else takes vacation time. Expect lots of activity in September as the Obama administration strives to deliver financial reform by the end of the year.

In the meantime, the administration is taking some time to pat itself on the back for its work so far. Hopefully everyone will return from their summer repose with clear heads and a bit less urgency. Of course, clear-headed thinking is always welcomed and although a sense of urgency was required during the most tumultuous and downright scary times of the past 12 months, its now time for legislators and the like to more calmly assess the current environment and suggest changes that are more than a knee-jerk reaction to events.

The danger, of course, is that the current more upbeat economic news and the stock market rally will lull both elected officials as well as the general citizenry into a sense that we can go back to business as usual. Let’s keep our fingers crossed that the U.S. government will act swiftly yet prudently and that the focus will remain on the economy and won’t be wholly diverted to our other crisis and Obama priority—healthcare.

When asked what is most important, money or health, most individuals would select health. Rightfully so, but let’s not lose the focus on the economy.

Tracking the Obama regulatory reforms

Putting to one side the lack of substance and boldness in certain aspects of the Obama financial industry regulatory reforms, one thing that the Treasury White Paper is long on is dates for various things to be done by.

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Super Fed

The U.S. Department of Treasury released “A New Foundation: Rebuilding Financial Supervision and Regulation” on June 17. The 89-page report outlines the Obama administration’s long-anticipated recommendations for getting the U.S. financial system back on its feet and to prevent the recurrence of the systemic breakdown from which the world economy is still. The reforms seek to undo what the report calls complacency among financial intermediaries and investors that “go back decades.”

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Warming Up the Crowd

In an op-ed piece in the June 15 Washington Post, U.S. Treasury Secretary Tim Geithner and National Economic Council Director Larry Summers made the case for Obama’s financial reforms, which the president will provide on June 17. In the article, Geithner and Summers restrained from blaming financial institutions directly for the current economic mess. Instead, they spread the blame, naming consumers’ seemingly inexhaustible appetite for consumption and therefore debt, the lending practices of subprime mortgage lenders, and the use of murky financial instruments and over leverage by financial institutions as contributors to the problem.

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