We’d said the 50 state attorneys general settlement was wobblier than the press cheerleading would lead you to believe. We’ve also said the California AG, Kamala Harris, was likely to be among the defectors. The odds of that increased today as she met with New York AG Eric Schneiderman to discuss joining the probe that he and Delaware AG Beau Biden have launched, which is the most extensive investigation undertaken to date.
It isn’t hard to see why the settlement talks are fracturing. Many AGs are unhappy with Tom Miller’s failure to keep them in the loop, the lack of meaningful investigations, and the high odds that the banks will get a broad waiver, which is tantamount to a big “get out of liability free card”. If you have any doubts whose interests are served by these negotiations, Jamie Dimon, in an investor conference call Wednesday, said he “would do anything to get it done today.” And no wonder why. He also said, per Bloomberg:
There have been so many flaws in mortgages that it’s been an unmitigated disaster…We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it’s going to go on for a long time.
Given that California was one of the states worst hit by the mortgage meltdown, its abstention from a settlement deal would have a disproportionate impact. Politically, the fact that the states that have exited and appear likely to exit have Democratic AGs is also more of a blow to the Administration, which has been involved in the negotiations that Republican defections would be.
From the Los Angeles Times (hat tip Lisa Epstein):
California Atty. Gen. Kamala Harris met with New York Atty. Gen. Eric Schneiderman on Thursday in San Francisco to discuss cooperating on the investigation, which is already one of the broadest to probe how banks encouraged the financial crisis through the creation of risky financial instruments backed by mortgages.
New York and Delaware have more than a dozen attorneys working full time on the effort and have subpoenaed or requested information from 13 financial firms, including Goldman Sachs and JPMorgan Chase & Co., according to people familiar with the investigation. The people spoke on condition of anonymity because of the sensitivity of the investigation…
Biden and Schneiderman have separate but parallel investigations into the matter and have signed an agreement to share information, people familiar with the cases said.