I’m sure the banksters are quaking in their boots. Eric Schneiderman, the New York state attorney general whose joining a heretofore moribund mortgage fraud task force and withdrawing from opposition to the horrid mortgage settlement allowed the Administration to push the bank-friendy deal across the line, is now making noises that really, truly, he and his Federal best buddies are gonna nail some baddies really soon. From Reuters:
The mortgage task force formed by President Barack Obama to probe misconduct that contributed to the financial crisis will soon take legal action, New York Attorney General Eric Schneiderman said on Thursday.
Schneiderman, a co-chair of the task force, would not say whether cases would be brought against individuals or financial institutions. He also would not comment on whether criminal charges would be filed.
But he said his office would take action and that he expected his federal counterparts on the task force to do so as well.
“We’ll see actions being taken sooner rather than later,” said Schneiderman, speaking in an interview at his office in New York.
The Residential Mortgage-Backed Securities Working Group was formed in January, to probe the pooling and sale of risky mortgages in the runup to the 2008 financial crisis. Obama said he was creating the group to “hold accountable those who broke the law” and “help turn the page on an era of recklessness.”
Schneiderman said he believes it is still necessary to go after the “bad actors” to restore confidence in the financial markets.
“It’s important to convey the sense that no one is above the law. There’s a set of rules to which all will be held accountable, including big players on Wall Street,” Schneiderman said.
It might help if Reuters did reporting rather than took dictation. As we pointed out in older posts, this “task force” is merely a new unit in an interagency Financial Fraud Enforcement Task Force established in 2009 which looks to have done precisely nothing since its inception. And the New York Times, which had been solidly in Scheiderman’s camp when he looked to be taking on the big banks, issued a “show me” op ed and specified what Schneiderman and the Feds needed to do to be credible:
To win and retain public trust…The administration must ensure that the group has ample resources. The co-chairmen must hire a tough-as-nails prosecutor with a successful track record in financial fraud to drive the investigation forward. And the group must move quickly and vigorously, issuing subpoenas and filing cases. It is not starting from scratch; various agencies have all had separate investigations under way.
Neither of these things have happened. Schneiderman and his new allies have thrown out staff numbers that were way too low to be taken seriously even if these were new resources. And it was very clear they weren’t that the task force was simply taking all the people already working on various mortgage related investigations (which were clearly going nowhere, given how many years have elapsed since the toxic phase of mortgage origination) and redesignating them as mortgage task force members (yes, there were eventually some new hires, but again, too few to change this basic picture, and no high-profile, kick-ass prosecutor leading the charge).
And that’s before you get to the way the Administration went out of its way to humiliate Schneiderman. As we wrote in April:
It was pretty obvious Schneiderman had been had. Obama tellingly did not mention his name in the SOTU. Schneiderman was only a co-chairman of the effort and would still stay on in his day job as state AG, begging the question of how much time he would be able to spend on the task force. His co-chairman is Lanny Breuer from the missing-in-action Department of Justice. And most important, no one on the committee was head of an agency, again demonstrating that this wasn’t a top Administration priority.
The Administration started undercutting Schneiderman almost immediately. He announced that the task force would have “hundreds” of investigators. Breuer said it would have only 55, a simply pathetic number (the far less costly savings & loan crisis had over 1000 FBI agents assigned to it). And they taunted him publicly by exposing that he hadn’t gotten a tougher release as he has claimed to justify his sabotage….
This update comes from the New York Daily News (hat tip Matt Stoller):
On March 9 — 45 days after the speech and 30 days after the announcement — we met with Schneiderman in New York City and asked him for an update…As of that date, he had no office, no phones, no staff and no executive director. None of the 55 staff members promised by Holder had materialized. On April 2, we bumped into Schneiderman on a train leaving Washington for New York and learned that the situation was the same.
Tuesday, calls to the Justice Department’s switchboard requesting to be connected with the working group produced the answer, “I really don’t know where to send you.” After being transferred to the attorney general’s office and asking for a phone number for the working group, the answer was, “I’m not aware of one.”…
In fact, the new Residential Mortgage-Backed Securities Working Group was the sixth such entity formed since the start of the financial crisis in 2009. The grand total of staff working for all of the previous five groups was one, according to a surprised Schneiderman. In Washington, where staffs grow like cherry blossoms, this is a remarkable occurrence.
We are led to conclude that Donovan was right. The settlement and working group — taken together — were a coup: a public relations coup for the White House and the banks…
But for 12 million American homeowners, collectively $700 billion under water, this was just another in a long series of sham transactions.
Back to the current post. Remember, for this, Schneiderman betrayed the public and made it possible for the banks to get a settlement that had state and federal prosecutors sign away their ability to use the best legal theories for pursuing mortgage abuses, that of chain of title issues.
And his little sales pitch to Reuters is revealing. There are no typical prosecutor statements about bringing criminals to justice, rooting out bad conduct, busting up fraudulent operations. He’s not trying to pretend that the Task Force plans to get to the bottom of anything. Schneiderman knows that reporters and commentators on this beat know full well that the task force is an exercise in “all hat, no cattle” and he’s only willing to go so far in PR messaging. Look at what he said: the task force is not seeking to render justice. It’s out to restore confidence!
That means, above all, don’t rattle the banks. As Marcy Wheeler pointed out, not upsetting the financial services industry is now an excuse for not prosecuting big corporate miscreants. She introduces an excerpt from a speech by the DoJ’s Lanny Breuer, one of Schneiderman’s co-chairs on the task force:
But the real tell is when he confesses that he “sometimes–though … not always” let corporations off because a CEO or an economist scared him with threats of global markets failing if he held a corporation accountable by indicting it.
To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs, and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects. Sometimes – though, let me stress, not always – these presentations are compelling. [my emphasis]
None of this is surprising, of course. It has long been clear that Breuer’s Criminal Division often bows to the scare tactics of Breuer’s once and future client base.
So let’s go back to the Schneiderman statement:
It’s important to convey the sense that no one is above the law. There’s a set of rules to which all will be held accountable, including big players on Wall Street.
Notice the revealing word choice: “important to convey the sense”. Not “important to enforce the law.” This is (at most) about maintaining the appearance of being even handed about enforcement.
Schneiderman appears to be on track to living up to our low expectation of engaging in a Potemkin version of an investigation, bringing a few cases close to the election to generate deceptive and useful “tough on crime” headlines. As we wrote in April:
Schneiderman entered into an obvious Faustian pact. He’s not getting his soul or his reputation back.