According to the New York Times, the Federal Bureau of Investigation and the criminal division of the Internal Revenue Service have formed a task force to examine mortgages that were made with little or no proof of the earnings or assets of borrowers. Federal prosecutors in New York, Los Angeles, Philadelphia, Dallas and Atlanta are involved in the investigation.

While the new task force is focusing on the role of mortgage lenders and brokers in low- or no-documentation loans, it is also examining how the loans were securitized and sold on the financial markets to investors.

In March, the began looking into whether the Countrywide Financial Corporation misrepresented its financial condition and loans. The company is also under the microscope in California and Illinois as well as by the Executive Office of the United States Trustee.

What’s interesting is that the government gets involved in these schemes only after the house of cards has already tumbled, rather than acting on information before something bad happens. Sure, Countrywide is a bad apple - but so are a slew of other lenders, servicers, financial services companies, and sundry players in the mortgage mess. But so long as the money train kept running, the government took a hands-off approach. Now that the townsfolk are standing outside the door wielding pitchforks, that’s different.

Doctor Frankenstein is looking to hand over the monster that he created. Stay tuned for the inevitable hearings, lynchings, and mass executions. Then, when the rabble dies down we can get back to the business that American corporations so adore - fleecing the consumer.

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