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October 29, 2013

Is FIRREA a Gamechanger?

Analysis from Reuters says that a recent verdict against Bank of America could have profound implications for Wall Street.

Federal prosecutors are dusting off a once-dormant statute called the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) that was passed in the 1980’s in reaction to the savings-and-loans crisis:

The law, which allows the Justice Department to sue over fraud affecting a federally insured financial institution, gives civil lawyers the ability to tap grand jury material and subpoena documents they would not otherwise be able to get.

It also has a 10-year statute of limitations, longer than the typical five years for fraud cases, potentially giving lawyers in [U.S. Attorney Preet] Bharara’s office and other arms of the Justice Department more time to investigate the 2007-2008 financial crisis.

The case was the first time the government’s use of FIRREA was tested at trial, but the DOJ is invoking the law in many of the suits it is now bringing against financial institutions. “The pipeline is not dry,” warns Bharara.

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