“Three years after the financial crisis peaked, banks face a new wave of scrutiny and potential penalties for actions that contributed to the mortgage meltdown, possibly raising their costs for the cleanup.
The Justice Department has instructed federal prosecutors to be creative in adapting decades-old laws to take action against Wall Street over the $1 trillion mortgage machine that helped fuel the crisis.
“We’ve been…encouraging the use of familiar, affirmative civil-enforcement tools in new ways,” said Assistant Attorney General Tony West.
Prosecutors are responding by deploying some powerful laws—including the Civil War-era’s False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act, a legacy of the savings-and-loan crisis—that have lower burdens of proof than federal criminal statutes.
New York Attorney General Eric Schneiderman is considering using tools such as the state’s Martin Act, which doesn’t require prosecutors to prove an intent to defraud. Mr. Schneiderman’s office has requested informal meetings with executives of Bank of America Corp., Deutsche Bank AG, Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Morgan Stanley and UBSAG, according to people familiar with the matter. Representatives for the banks declined to comment.
The escalating activity in recent weeks has…..”
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