Feds seek collapse culprits Taxpayers

Pensacola News Journal

If there’s a criminal side to the financial crisis that has pummeled U.S. homeowners and Wall Street institutions, it has yet to surface in a big way.

But that may change.

The Securities and Exchange Commission, the federal agency that oversees the stock market, has embarked on what top officials described as a “sweeping ” investigation into possible market manipulation of the securities of certain financial institutions.

FBI Director Robert Mueller said his agency has 24 open investigations focused on large corporations where illegal activity may have occurred during the September market meltdown that led the Bush administration to propose a $700 billion rescue plan.

“The FBI will pursue these cases as far up the corporate chain as is necessary to ensure that those responsible receive the justice they deserve,” Mueller told a congressional panel last week.

Law enforcement officials also are pursuing mortgage fraud that experts said was a significant factor in the meltdown of the housing market.

U.S. taxpayers, who ultimately will pay for the financial bailout Congress is close to passing, are demanding that someone be punished for the meltdown. They’re irate that so many people were allowed, and even encouraged, to buy homes they couldn’t afford.

“We have a problem knowing that the very people who caused the problem will literally sail off into the sunset on their yachts,” Ed and Kate Canning of Rupert, Vt., said in a letter to Sen. Bernie Sanders, I-Vt. “What about some accountability for what has already been done? What about being forced to pay back the obscene bonuses and salaries earned in the course of this unprecedented example of unscrupulous pillaging?”

Reports of mortgage fraud reached record levels in 2007, and the trend appeared to continue into early 2008, according to the Mortgage Asset Research Institute, which collects mortgage fraud reports from lenders and other sources.

New York securities attorney Stuart Meissner said investigators appear to be concentrating on traders involved in short selling, a legal investment strategy designed to produce profits when a stock price declines.

“The focus is on market manipulation by short sellers spreading false rumors in order to knock down these financial stocks,” Meissner said. “But it’s difficult to investigate. You’re talking about tracking down rumors and tracing them back to ground zero.”