Federal authorities are scrutinizing private consultants hired to clean up financial misdeeds like money laundering and foreclosure abuses, taking aim at an industry that is paid billions of dollars by the same banks it is expected to police, the New York Times DealBook blog reported yesterday. The consultants operate with scant supervision and produce mixed results, according to government documents. The pitfalls were exposed last month when federal regulators halted a broad effort to help millions of homeowners in foreclosure. The regulators reached an $8.5 billion settlement with banks, scuttling a flawed foreclosure review run by eight consulting firms. In the end, borrowers hurt by shoddy practices are likely to receive less money than they deserve, regulators said. Sen. Elizabeth Warren (D-Mass.) and Rep. Elijah Cummings (D-Md.) announced yesterday that they would open an investigation into the foreclosure review, seeking "additional information about the scope of the harms found."
