Fraud Enforcement and Recovery Act of 2009

Fraud Enforcement and Recovery Act of 2009
U.S. Government · Public domain · source
Name	Fraud Enforcement and Recovery Act of 2009
Enacted	2009
Enacted by	111th United States Congress
Effective	2009
Public law	Public Law 111–21
Introduced by	Barney Frank
Signed by	Barack Obama
Signed date	May 20, 2009

Fraud Enforcement and Recovery Act of 2009 The Fraud Enforcement and Recovery Act of 2009 (FERA) is a United States statute enacted during the administration of Barack Obama and the tenure of the 111th United States Congress to strengthen criminal enforcement of financial fraud and to enhance civil recovery mechanisms following the 2007–2008 financial crisis. The law amended existing statutes such as the False Claims Act, expanded the authority of institutions like the Department of Justice and the Federal Bureau of Investigation, and created new resources aimed at addressing misconduct associated with the subprime mortgage crisis, Troubled Asset Relief Program, and related markets.

Background and Legislative History

FERA was developed amid legislative responses to the 2007–2008 financial crisis and followed initiatives led by congressional committees including the House Financial Services Committee and the Senate Committee on the Judiciary. Sponsors included Representatives Barney Frank and Darrell Issa in legislative negotiations that intersected with testimony from officials at the Federal Reserve System, the Securities and Exchange Commission, and the Treasury Department. Debate drew on earlier statutes such as the Fraud Enforcement and Recovery Act of 2009's parent statutes including the False Claims Act and precedents set by cases at the United States District Court for the Southern District of New York and the United States Court of Appeals for the Second Circuit. Passage in the House of Representatives and the United States Senate culminated with signature by Barack Obama on May 20, 2009, joining other post-crisis measures like the Dodd–Frank Wall Street Reform and Consumer Protection Act.

Key Provisions

FERA amended the False Claims Act to clarify liability for false statements to obtain federal payments, expanded the scope of mail fraud and wire fraud statutes to cover fraudulent conduct involving financial products and services, and increased criminal penalties under statutes such as bank fraud and securities fraud provisions enforced by the Department of Justice and Securities and Exchange Commission. The Act granted enhanced subpoena authority to the Federal Reserve System and the Federal Deposit Insurance Corporation, provided funding for task forces combining personnel from the FBI, DOJ, and state prosecutors, and created new civil enforcement tools for recovery of funds lost through programs like the Troubled Asset Relief Program and contracts administered by the Department of Housing and Urban Development. FERA also clarified the definition of "financial institution" in statutes like the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 context and extended protections for whistleblowers invoking the False Claims Act and related qui tam mechanisms.

Implementation and Enforcement

Implementation relied on interagency coordination among the Department of Justice, the Federal Bureau of Investigation, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and state attorneys general such as those from New York and California. Enforcement operations often occurred in districts with major financial centers like the Southern District of New York, the Northern District of Illinois, and the District of Columbia. Task forces combined prosecutorial resources from offices including the United States Attorney's Office and investigative capacities from the FBI's Financial Crimes Section. Agencies used FERA-enhanced tools in parallel civil and criminal proceedings, cooperating with international counterparts including authorities in United Kingdom, Germany, and Switzerland on cross-border investigations into mortgage-backed securities and derivatives tied to the subprime mortgage crisis.

Impact and Criticism

Supporters cited recoveries and deterrence in high-profile matters involving financial institutions such as Bank of America, JPMorgan Chase, and Citigroup and noted increased recoveries under the False Claims Act framework. Critics argued FERA's amendments created regulatory complexity and uneven application, raising concerns among academics from institutions like Harvard University and Yale University about prosecutorial discretion and potential chilling effects on legitimate financial innovation. State officials including attorneys general from New York and Texas debated resource allocation, while commentators in outlets referencing analyses from the Brookings Institution and the American Enterprise Institute questioned the sufficiency of FERA relative to structural reforms later embodied in the Dodd–Frank Wall Street Reform and Consumer Protection Act.

Notable Cases and Prosecutions

FERA-enabled investigations contributed to settlements and prosecutions involving allegations tied to mortgage origination, securitization, and servicing, with notable actions against entities such as Countrywide Financial, IndyMac Bank, and contractual counterparties implicated in the mortgage-backed security market. Several civil recoveries under the False Claims Act and parallel criminal trials prosecuted in the Southern District of New York and other jurisdictions resulted in multi-billion dollar settlements, coordination with state-level actions by attorneys general from New York and California, and cooperation with federal receivership proceedings such as those managed by the Federal Deposit Insurance Corporation. High-profile prosecutions also involved corporate executives and institutions investigated by the Department of Justice and litigated in federal courts, shaping subsequent enforcement strategy and informing congressional oversight hearings before panels such as the House Financial Services Committee.

Category:United States federal legislation