A forgotten 30-year law is now being reviewed by US federal prosecutors. The effort stems on its aim to use its provisions to go after the Wall Street banks that sold toxic loans during the housing bubble in 2008.
The law, enacted in 1984, was meant to penalize individuals for swindling commercial banks. This means prosecutor will now run after the perpetrators through a bank fraud rather than the securities fraud.
The problem with the securities fraud charge is the very narrow window for prosecution, with the statute of limitations good only for five years. In contrast, bank fraud has a 10-year window and carries US $1 million in fines and a 30-year prison term.
Members of the Residential Mortgage-Backed Securities Working Group are doing the investigation and identify the perpetrators.
"The RMBS Working Group members are aggressively investigating both civil and criminal matters across the country. RMBS Working Group members expect to announce more law enforcement actions in the future," said Adora Jenkins, a spokeswoman for the Justice Department.
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