SEC and FBI Seek More Authority to Punish Financial Crimes On the Rise

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SEC and FBI Seek More Authority to Punish Financial Crimes On the Rise
Federal authorities charged with cracking down on violations of the nations’ financial laws want more power to prevent predatory lending and other crimes during the worst economic downturn in a generation.


Officials from the Securities and Exchange Commission, the Department of Justice, and the Federal Bureau of Investigation told lawmakers at a House Financial Services Committee meeting that new laws and changes to existing laws may be needed to battle a tidal wave of financial crimes.

“We cannot prosecute people for breaking rules that did not exist and one thing we need to think about is the rules we need going forward,” said the committee’s chairman, Rep. Barney Frank (D-Mass.).
Changes May Be Coming
One of the changes may be expanding the current legal definition of “financial institution” to include mortgage lenders for fraud prosecution. Mortgage lenders are blamed by many for issuing home loans to borrowers who could not afford them, contributing to the nation’s worsening credit and financial crisis.

Federal authorities said lax underwriting standards and other deceptive business practices failed to protect consumers from subprime mortgages, which boomed along with the housing market in the past decade.

Changes may also be necessary with regard to the $700 billion Trouble Asset Relieve Program and other recent expenditures of taxpayer dollars designed to revive the ailing U.S. economy. Those funds are particularly susceptible to corruption and abuse and must be policed to ensure they are spent wisely, federal authorities said.

“The department is well aware that when large investments of taxpayer money are doled out over a short period of time, people will try to exploit the system and criminally profit,” said Rita Glavin, acting assistant attorney general for the criminal division of the Department of Justice.
Dozens of Investigations Underway
FBI officials said they are currently investigating 43 cases of corporate fraud involving allegations of accounting fraud, insider trading, and filing false financial statements. There are also several investigations focused on subprime lenders and massive write-downs of asset values by investment banks during the financial crisis, prosecutors said.
Tough Oversight of Funds is Needed
With names like Bernard Madoff and Allen Stanford linked to Ponzi schemes blamed for costing investors billions of dollars, the need for tough laws against financial crimes is abundantly clear. The SEC, FBI, DOJ, and other federal and state agencies charged with ensuring the integrity of the U.S. financial markets must be given all the tools they need to do their jobs.