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Paul Kiesel
Paul Kiesel
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The FBI's Subprime Task Force

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The FBI is forming a subprime lending task force in response to possible fraud and misconduct by subprime lenders. Over the last six weeks federal authorities have been trying to determine whether or not lenders and Wall Street were aware of or participated in any fraud.

On CNNMoney.com, Robert Nardoza, a spokesman for the U.S. Attorney’s office in Brooklyn, New York, confirmed a report on Monday that, “a task force, comprised of federal, state and local agencies, would focus on the activities of mortgage lenders and Wall Street firms,” (CNNMoney.com, 5/5/08), declining to give further comment.

The key question the FBI’s subprime task force will try to answer is whether or not Wall Street firms knew about the risks of mortgage securities backed by subprime loans, and if they hid risks from investors. 

The FBI, as well, should take a hard look at the TILA forms that allowed for these subprime loans to be executed. There’s a good chance that dots will connect after investigating the origin of the loans that helped precipitate the subprime mortgage crash, which is now affecting prime borrowers adversely.

The Wall Street Journal, however, continues to reports sources, like U.S. Attorney Benton Campbell, that believe market forces, rather than fraud, might have had a larger role in the current mortgage crisis. Market forces only helped fuel the fire.