Subpoenas Issued to Financial Firms in Expanded Probe

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Housed within an earlier financial fraud task force that Obama created in 2009, it is expected to be staffed with around 50 attorneys, analysts and agents, officials said.

Some skeptics have questioned whether the new group is largely a political move because the other fraud task force already exists.

Also, the Obama administration has received heat from left-leaning activist groups that believe a separate effort to investigate misconduct in processing foreclosures and servicing home loans may not be rigorous enough to extract a meaningful settlement.

In exchange for providing up to $25 billion in housing relief, much in the form of cutting mortgage debt for distressed borrowers, the top U.S. banks are expected to put behind them government lawsuits about lending and servicing abuses - but not securitization claims.

The banks involved in the discussions include Bank of America, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup and Ally Financial Inc.

Those talks have dragged into their second year as some states, including California and New York, criticized the direction of the negotiations and said the proposed settlement would release the banks from too many claims.

The deal appears to be getting closer, with last-ditch efforts to lure the hold-out states to join.

California has said it still has reservations about the deal, but California Attorney General Kamala Harris has met in recent weeks with federal officials in Washington to discuss her concerns about the settlement, people familiar with the matter said.

The attorney general in New York, Eric Schneiderman, was named as a co-chair of the new working group, prompting speculation that the position was partly aimed at persuading him to join the settlement.