Challenging FIRREA Subpoenas: The RMBS Working Group Faces Subpoena Fight
Bloomberg BNAAndrew W. Schilling
As the Justice Department has stepped up its pursuit of financial institutions, there has been a surge of civil fraud lawsuits brought by the government under FIRREA — the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 — a law that allows the government to sue for civil penalties for fraudulent conduct affecting federally insured financial institutions. FIRREA has been used as the basis for investigations and fraud lawsuits against banks and mortgage lenders in a variety of contexts, including the rating and sale of residential mortgage backed securities (RMBS), government loan originations, conventional loan sales to Fannie Mae and Freddie Mac, and the supervision of payment processors. Using FIRREA, the government has obtained sizable settlements, prevailed in several recent court challenges to the government’s expansive use of FIRREA, and most recently a significant financial institution to go to trial. Its statute of limitations reaches back ten years, and thus exposes to scrutiny actions the Justice Department perceives as contributing to the 2007 financial crisis.
Originally published in BNA's Banking Report; reprinted with permission.