(Corrects column published Oct. 31 in fourth paragraph and in subsequent references to the Corporate Fraud Task Force to say it still is active and that federal agents coordinate mortgage and securitization fraud cases.)

Oct. 31 (Bloomberg) -- Attorney General Michael Mukasey says that however serious the mortgage-fraud crisis, it essentially amounts to a series of ``white-collar street crimes.''

So, no, he wouldn't be setting up a special federal task force to coordinate criminal prosecutions related to the crisis, he told reporters in June.

``It is a problem that arises in particular markets,'' Mukasey said.

That's why Mukasey decided against creating one, national task force, staffed with its own prosecutors and agents, to focus on mortgage and securitization cases.

Instead, the FBI and U.S. attorneys' offices have launched individual investigations through mini-task forces across the country that coordinate with each other and, to some degree, through an umbrella task force set up in 2002, according to the Justice Department.

As accounting frauds capsized some of the nation's largest corporations, roiled the markets and shocked investors -- back before anyone could have imagined it could possibly get much, much worse -- George W. Bush created the President's Corporate Fraud Task Force and put the nation's deputy attorney general in charge of it.

Love to Hate

OK, so who cares about some organizational structure with a fancy name? Isn't that just a way to look like the White House was doing something about the greedy white collars the public so loves to hate?

Public relations isn't a bad thing for boosting confidence in the market if you back it up with substance. Creating an umbrella structure forced far-flung and often competing federal, state and local law enforcers to at least talk to each other.

They shared information regularly and traded ideas on best practices. They shifted investigators from one probe to another as needs changed.

That's how the feds nailed executives at Enron Corp., WorldCom Inc. or Adelphia Communications Corp. In fact, Enron had its own task force, with its own prosecutors and agents dedicated to unraveling what happened there.

As of April, the Corporate Fraud Task Force counted almost 1,300 fraud convictions under its belt, including more than 200 chief executive officers and corporate presidents.

The approach had its critics, who accused the Justice Department of too much zeal and too little fairness. Its prosecution of Arthur Andersen put the accounting firm into bankruptcy, only to have its conviction reversed by the U.S. Supreme Court -- too late to help.

Slapped down by a federal judge for browbeating companies to deny legal help for accused executives and slammed by the organized bar, the department eased up on that practice.

Bogus Loans

As for the mortgage crisis, federal and state authorities have been busily prosecuting lenders for bogus loans for years now. But so far they haven't moved up that chain very far. Two Bear Stearns Cos. hedge fund managers indicted earlier this year are the exception to the rule.

If ever this nation's law enforcers needed that unity of purpose in uncovering white-collar crime, this is that time.

True, much of the conduct to blame for the current crisis isn't criminal. Recklessness, bad judgment, lax regulation and easily duped politicians all pitched in.

``We have a whole industry that was undone by a series of decisions that everybody seems to have been a party to at some level,'' says Samuel Buell, formerly a prosecutor in the Enron probe.

No Easy Case

This isn't the sort of scenario that easily lends itself to prosecution, says Buell, who now teaches law at Washington University in St. Louis.

And yet, to whatever degree people engaged in intentional, material misrepresentation for individual gain, they committed fraud.

Beginning with borrowers and lenders who lied to make the mortgage, to loan packagers who ignored the weaknesses in their packages when pricing them, to the financial firms that knowingly sold over-valued securities backed by shaky assets, to the bankers who promised that iffy instruments were rock solid, there are some fraudsters in the bunch.

And given the interconnectedness and sophistication of the conduct that got us here, a coordinated effort would help.

The Justice Department says there's plenty of coordination among the various task forces focusing on mortgage fraud and securitization issues.

Last Meeting

The Corporate Fraud Task Force still exists. It last met in June, and ``this type of fraud was a major topic of discussion,'' department spokesman Evan Peterson said in an e-mail message.

The task force plans to meet again `in the near future,'' and its members ``still coordinate actively'' in the meantime.

The question is whether it's as active as it was, and whether there's a need to set up the equivalent of the Enron Task Force dedicated to mortgage and securitization cases.

Federal and state agents are poring over financial records to sort out what happened. Lehman Brothers Holdings Inc. alone is facing federal grand jury investigations by U.S. attorneys in Brooklyn, Manhattan and Newark, New Jersey.

The FBI has hundreds of mortgage-related investigations in the works, but its agents are stretched thin. The New York Times reported this month that the bureau's staffing for white-collar investigations dropped by 36 percent after the Sept. 11 attacks, when agents were reassigned to anti-terrorism efforts.

Surely if we can afford to prop up American International Group Inc., Fannie Mae and Freddie Mac, buy a bunch of bad mortgages and infuse capital into ailing banks, we can staff up sufficiently to investigate the people who made all that necessary.

And the creation of a Mortgage Fraud Task Force would allow the sort of focused effort that worked before.

(Ann Woolner is a Bloomberg news columnist. The opinions expressed are her own.)

To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net.

Last Updated: November 2, 2008 10:38 EST