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FEATURE SECONDARY MARKET Fraud Enforcement Task Force (FFETF)—a signature initiative established by executive order in 2009 that coordinates action against suspects with federal agen- cies, state attorneys general, and state partners. Statements suggest the Working Group will func- tion as a smaller version of the FFETF, standing up cases against those who purportedly gamed the system—and the economy—by misrepresenting shoddy RMBS. The creation of an elite task force designed for bringing in suspected RMBS fraudsters right- fully sends a shiver up the backs of many servicing executives. The rank-and-file for co-chairs reads like a civilian version of the Class the Stars Fell Upon, with Holder and Schneiderman top- ping a list that includes HUD Secretary Shaun Donovan and SEC enforcement director Robert Khuzami, among many other state and federal officials. Represented by the task force: the CFPB, Justice Department, HUD, Internal Revenue Service, Securities and Exchange Commission (SEC), state attor- neys general, and many others. And that's just a start. Serving in a semi-autonomous capacity under the FFETF, the Working Group brings shoulder-to-shoulder a cluster of law enforcement agencies and personnel, including more than 55 Justice Department attorneys, 15 civil and criminal attorneys, and 10 FBI agents and analysts— and growing. Officials said at the conference that 30 more attor- neys will join the task force in the weeks ahead. "I can assure you that, if we uncover evidence of fraud or other illegal conduct, we will bring the appropriate criminal or civil charges," Holder said of the Working Group at the conference. Just fluff? Maybe not. The officials pledged to take the law to institu- tions found culpable for falsifying millions of securities that went down with investments, nest eggs, home equity, and capital re- serves for Systemically Important 76 | THE M REPORT Financial Institutions. According to statements, the Working Group will also compensate and provide relief to victims of the financial crisis. The potential for new courtroom cases builds on class- action lawsuits by investors and mega-settlements already under way with the federal government. Missal adds that federal of- ficials "wouldn't organize a group like that unless they thought that there were issues that needed to be addressed and they were prepared to bring actions so they can have accountability." But some say the inclusion of so much top brass and fire- power signals a cynical stab at "window dressing" for a general election—one in which Obama may need to account for percep- tions of apostasy with liberal and independent voters. Working for Re-election I t isn't unprecedented for chief executives and their political party—or the opposition—to try to turn a few undecided votes with Beltway theater. Consider efforts by state attorneys general to overturn ObamaCare this year or servicing reforms under way that Obama turned into a so- called Homeowner's Bill of Rights. "There are clearly political benefits that come with the announcement of the new task force," Alison Frankel, an analyst for Thomson Reuters, wrote re- cently for the news service. She called it a "gesture to critics who want to see MBS securitizers and trustees answer for their actions," suggesting that much of the brouhaha masks the fact that not one agency—includ- ing the FFETF—has brought charges against a single former or current executive with one of the major financial institutions. "I hope that's not why the president called for an MBS task force," she added. Seeming to think along the same lines, several news outlets— CNN, Reuters, and The Wall Street Journal, among others—fielded Frankel's concerns in stories from February. CNN quoted one Neil Barofsky, a former special inspec- tor general of the bailouts, as calling the task force a "political rebranding of . . . existing efforts" to pursue mortgage fraud from the financial crisis. "You're putting someone in charge of it [the Working Group] who doesn't have experience with securities fraud," he told the news source, suggesting officials with more experience and clout in securities fraud investiga- tions—including hard-hitting Manhattan U.S. Attorney Preet Bharara, notably absent from the luminous list of co-chairs—could better crack down on suspects. "Why don't you have your most skilled A-team contributing to this?" he asked. Others suggest that naming a few high-profile co-chairs to helm the Working Group helped seal the participation of 49 state attorneys general in the historic $25 billion servicer settlement in February. Schneiderman reportedly stayed near the fringes of the deal, with his role still uncertain until officials revealed the settlement. Missal counters the suggestion of politics-as-usual by warning that "investigations take time" to build and may not achieve results for a president's re-election campaign. "It's not as simple as doing an investigation and bringing a case," he says. While the federal government may by and large bring suits for cases that go back as far as a century, he says, statutes of limi- tations apply to state and local jurisdictions that could prevent authorities from taking a case from the 2000s to court today. So is the Working Group a Clausewitzian continuation of politics by other means? Frankel's article says try again. The columnist cited an email she received from the Justice Department when describing the exact nature of the RMBS Working Group, with one spokesperson telling her the task force "will not empower state attorneys general to enforce any statute that they could not other- wise enforce." "What the MBS task force really adds to existing investiga- tions is some additional DOJ manpower and better coordina- tion among the various state and federal agencies," Frankel mused. In other words, the Working Group will likely serve as figure- head for much of the litigation moving forward, even while it streamlines casework and still- active investigations. Who Gets the Rap? S ome counter that the Working Group—despite a shortage of real enforcement power—will leave a mark in all the wrong places, not least a still-fragile economic recovery. "Lenders right now are gun-shy about making mortgage loans because they can get sued if they don't make the loan and they can get sued if they do make the loan," says Larry Platt, a col- league of Missal's and head of the mortgage banking group at K&L Gates. The refrain about the heavy- hand of government cuffing the invisible one isn't new. Servicing executives and trade groups con- tinue to lob an endless amount of criticism at "job-killing" rules, FDIC examiners, and "unac- countable" forces at the CFPB. Even so, the very mention of a "Financial Fraud Crimes Unit" in the State of the Union fueled rumors that state attorneys general could pull out from the mega-settlement with servicers. Schneiderman skirted concerns during the January press confer- ence by saying that the Working Group would not derail the mega- settlement with servicers and nearly two years of negotiations. Platt cites recent departures by big banks as reasons why the task force could dampen the eco- nomic recovery. Last year saw many names head for the exits, with Bank of America shuttering SECONDARY MARKET ANALYTICS SERVICING ORIGINATION