Dave Dayen saw this one coming. When Kamala Harris said she was not willing to participate in the so called “50 state” attorney general mortgage negotiations, he recognized Harris’ refusal to join the New York attorney general Schneiderman’s group as a bad sign. Note that the state of the talks is persistently misreported in the MSM as being only Schneiderman, when Delaware, Massachusetts, Kentucky, Nevada, and Minnesota are also out of the talks.
It is a safe bet that the Democratic party has been muscling Harris since her defection last week. The Administration is desperate to have the AGs provide legitimacy to their planned “settlement as coverup” strategy. Not that it will be that effective in the end. The threat of the two states where all securitization trusts are domiciled (New York and Delaware) has the potential to undermine the value of any settlement, particularly since New York has the potent weapon of the Martin Act. Merely those two states moving forward (and remember, it is more than those two states) has the potential to be extremely embarrassing to the Administration and the AGs who continue to serve as human shields for the Administration.
But the belief appears to be that even with this group pushing forward, nothing all that earth shattering will happen prior to the 2012 elections. That is an awfully risky bet. The filings this year by Schneiderman, Beau Biden, and Catherine Masto alone have provided ample evidence of bank misconduct, and also provide ideas and cover for private sector litigants (particularly investors, who are a very conservative bunch). And any settlement will not restrict the rights of private plaintiffs, such as aggrieved homeowners, to act.
Note that Harris’ body language is ambiguous: she has only said she is would take a better deal from the banks if she offered one, which merely means she is willing to negotiate with them separately. So narrowly, this is just a reiteration of her position as of last week. But this reaffirmation also opens the door to her rejoining the talks if the banks make meaningful movement, and Reuters concurs with this reading. I don’t see this happening (and neither does Massachusetts AG Martha Coakley, as quoted in the Wall Street Journal account).
From the Journal:
California Attorney General Kamala Harris, who dropped out last week from talks aimed at wringing a huge settlement from banks accused of foreclosure abuses, remains open to a deal if it involves “a stronger proposal” from lenders, according to a person familiar with the situation….
Negotiators believe they can still reach a broad-based settlement if enough states sign on and are able to lure back others that have balked at certain terms…
But no agreement has been reached on some of the most divisive issues, such as the extent to which banks should be released from additional legal claims.
Yves here. This is why whether Harris is in or out ultimately will not matter. There is no bargaining overlap between what the banks want (a big release) and what a fair number of the AGs are willing to give (a narrow release). Back to the article:
Ms. Harris’s decision to walk away from the negotiating table last week has contributed to a sense of urgency in the negotiations, said one person familiar with the banks’ thinking…
Obama administration officials have worked behind the scenes for months to try to keep the process on track. Some senior officials view a deal as an opportunity to widen the use of principal reductions for underwater mortgages.
Yves here. The principal reductions talk is PR. We’ve done the math before, and the dollars that the assembled parties are likely to get will not allow for deep enough mods to enough homeowners. They’d be better off applying it to writedowns of seconds and mortgage counseling (or to Adam Levitin’s impish suggestion, funding Legal Aid).
The Administration seems determined to keep up the belief that a settlement is imminent, which has been the party line since January. Penelope was able to keep her suitors at bay for 20 years by, among other things, dragging out the weaving of her Odysseus’ burial shroud. I don’t think the Administration will prove to be that resourceful.