Is Schneiderman Selling Out? Joins Federal Committee That Looks Designed to Undermine AGs Against Mortgage Settlement Deal

New York Attorney General Eric Schneiderman has been celebrated as the progressive Great White Hope. But the danger of assuming leadership is that that individual becomes a target both of attacks and of seduction. And while I’d like to think better of Schneiderman, an announcement earlier this evening has strong hallmarks of Schneiderman falling prey to the combined pressures and blandishments of the Administration and its allies.

Only a sketchy bit of news has been released, with the most extensive reporting so far coming in Huffington Post which incorrectly anticipated a State of the Union announcement of the fact that Schneiderman will be co-chairing a Federal committee to investigate mortgage abuses (the story appears to have been confirmed in general terms via an announcement from Schneiderman’s office). Key details from the HuffPo story:

The unit will not supersede the efforts already underway by the Department of Justice. Instead, it will operate as part of the president’s Financial Fraud Enforcement Task Force. In addition to Schneiderman, the unit will be co-chaired by Lanny Breuer, assistant attorney general at the Criminal Division of the Department of Justice, Robert Khuzami, director of enforcement at the SEC; John Walsh, a U.S. attorney in Colorado, and Tony West, assistant attorney general in the Civil Division at DOJ.

So get this: this is a committee that will “investigate.” The co-chair, Lanny Breuer, along with DoJ chief Eric Holder, hail from white shoe Washington law firm Covington & Burling, which has deep ties to the financial services industry. Even if they did not work directly for clients in the mortgage business, they come from a firm known for its deep political and regulatory connections (for instance: Gene Ludwig, the Covington partner I engaged for some complicated regulatory work when I was at Sumitomo Bank, later became head of the OCC). We’ve written at length on how the OCC is such a shameless tout for the banking industry that it cannot properly be called a regulator. Similarly, the SEC has been virtually absent from the mortgage beat, no doubt because its enforcement chief, Robert Khuzami, was general counsel to the fixed income department at Deutsche Bank. That area included the trading operation under Greg Lippmann who we have described as Patient Zero of so called mezz CDOs, or to the layperson, toxic mortgage paper that kept the subprime bubble going well beyond its sell date. And we don’t need to say much about the DoJ. It has been missing in action during this entire Administration.

Neil Barofsky, former prosecutor and head of SIGTARP, doesn’t buy the logic of this committee either:

A lot of soi-disant liberal groups have fallen in line with Obama messaging, which was the plan (I already have the predictable congratulatory Move On e-mail in my inbox). Let’s get real. The wee problem is that this committee looks like yet another bit of theater for the Administration to pretend, yet again, that it is Doing Something, while scoring a twofer by getting Schneiderman, who has been a pretty effective opponent, hobbled.

If you wanted a real investigation, you get a real independent investigator, with a real budget and staffing, and turn him loose. We had the FCIC which had a lot of hearings and produced a readable book that said everyone was responsible for the mortgage crisis, which was tantamount to saying no one was responsible. We even had an eleven-regulator Foreclosure Task Force that looked at 2800 loan files (and a mere 100 foreclosures) and found nothing very much wrong.

Now we have a committee full of people who have made numerous statements in the media and to Congressional committee minimizing the severity of the mortgage mess. Are were to believe they all had a conversion experience on the eve of the State of the Union address? But apparently the members of what passes for the left are prepared to take “investigation” at face value since it would be unpleasant to consider the possibility that they are being snookered again.

And it seems awfully plausible that the aim of getting Schneiderman on board with an Administration “investigation” is to undermine the effort by 15 Democrat attorneys general to devise their own strategy for dealing with mortgage abuses. We’ve heard reports privately that some of the defecting AGs are in a panic.

Put it another way: one thing that would convince me that this committee was serious was if the settlement pact was put on hold until the investigation were completed. The fact that the settlement push is in high gear is yet more proof that this committee is yet another bit of regulatory/enforcement theater, just like the Foreclosure Task Force, or the servicer consent decrees (confirmed as an embarrassment via the use of badly conflicted “consultants”), or the current OCC investigation into foreclosure abuses, which excludes all sorts of injuries inflicted upon homeowners, most notably servicer fees abuses and misapplication of payments.

And another indicator that the Administration is using every tool at its disposal to put pressure on the dissenting AGs: the Center for Responsible Lending has given a not terribly enthusiastic endorsement of the settlement pact. Why should this not be taken at face value? While the CRL has done some good work in the consumer lending space, anything it does in the mortgage arena should be viewed skeptically. The Center received a large grant from hedge fund manager John Paulson, who is famous for having made a fortune shorting subprime (readers of ECONNED will remember how we demonstrated that subprime shorts that used CDOs, as Paulson sometimes did, played a direct role in turning what would have been a contained subprime bubble into a global financial crisis). And most important, Paulson has been a vociferous opponent of investigations and policies to promote mortgage modifications. Remember, as we discussed when the Roosevelt Institute accepted money from the Peterson Foundation and then repudiated FDR’s legacy by publishing policy papers on how to “reform” entitlements, the real prize for the neoliberals is to get trusted progressive organizations to do their dirty work.

It’s clear what the Administration is getting from getting Schneiderman aligned with them. It is much less clear why Schneiderman is signing up. He can investigate and prosecute NOW. He has subpoena powers, staff, and the Martin Act. He doesn’t need to join a Federal committee to get permission to do his job. And this is true for ALL the others agencies represented on this committee. They have investigative and enforcement powers they have chosen not to use. So we are supposed to believe that a group, ex Schneiderman, that has been remarkably complacent, will suddenly get religion on the mortgage front because they are all in a room and Schneiderman is a co-chair?

Maybe Schneiderman has convinced himself that he will get more reach or resources this way, but I have trouble fathoming the logic. While he did do a real service by begin the first to question the AG settlement when that was a isolated and courageous position, and was also early to crank up investigations, other less well resourced states (Delaware, Nevada, Massachuseetts) that started later have filed serious cases. In particular, Catherine Cortez Masto of Nevada has been doing old fashioned, go-after-the-foot-soldiers-to-get-the-capos prosecutions of the sort Eliot Spitzer recommended in Inside Job. Why has Schneiderman, after such a promising start, done so little?

Maybe Schneiderman has fallen for the same sort of pitch that the Administration used on Elizabeth Warren. But the tradeoffs were completely different for her. The CFPB was her baby; giving her the chance to set it up was terribly seductive. And she could convince herself that she’d have more power as an insider than running a shadow CFPB out of Harvard to keep the real one honest. But Schneiderman already has a real power base and media reach. It’s hard to see what the Administration could offer him to get him to compromise his independence (which this effort will, no matter what he has convinced himself).

It would appear big aim of setting up this committee (and the uncertainty as to whether Schneiderman is now going to join the settlement deal) is to create disarray among the dissenting AGs. I’m sure it is no coincidence that there is a conference call scheduled for 11:00 AM tomorrow among the Democratic AGs. Delaware’s Biden as of Tuesday afternoon said he was not supporting a settlement, and there is good reason to think at least Masto of Nevada, who has been the most aggressive so far, will hold firm.

It would be better if I were proven wrong, but this looks to be yet another clever Obama gambit to neutralize his opposition. With all the same key actors in place – Geithner, Walsh, Holder – there is no reason to believe the Administration has had a change of heart until there is compelling evidence otherwise.

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    1. KnotRP

      If you ever go to the theater, and see a “surprising plot twist”, I assure you the playwright planned it well before
      the players learned their roles. Not in a million years would an AG play hardball knowing full well who is against him, then have a change of heart embedded in and announced in the SOTU. Enjoy the show. I assure you, it is a show.

      1. KnotRP

        It may have even served to flush out Obama’s less enthusiastic “supporters” in the process.

        Well played, Eric and Obama (golf clap).

        1. Up the Ante

          “Well played” ?

          Imagine how that would sit with the other dissenting AGs if Yves’ a “.. big aim of setting up this committee .. is to create disarray among the dissenting AGs. “. To think any of the AGs would not see it for what it is, and all it is is jockeying amongst his fellow dems for future election slots.

          “well played” with silence and inactivity.

          And to think, their selection criteria for those future election slots has literally become so superficial as to be based on the surfing of comments posted here, fill in our questionnaire, plz., the ‘defining populism project’ amongst the operatives.

    2. Yves Smith Post author

      As you might infer from the post, I think it is too, but the details are thin, and I do try to be scrupulous about not going beyond known facts. This looks bad and I have every reason to think it will play out accordingly.

      1. KnotRP

        There is only one other possibility:

        Obama has realized he is not going to be re-elected,
        no matter what clown shows up on the Rebublican side
        of the Demopublican Banker’s ticket.

        I’m expecting votes to be flung far and wide,
        since there is no lesser evil anymore…

        1. PghMike4

          I don’t think there’s any chance that Obama thinks he won’t be re-elected. His two most likely opponents are a multi-millionaire who made his money buying and looting companies, and a certified nut case. And he’s a good campaigner.

        2. Jane Doe

          There is zero chance of that possibility. What would really be in it for Obama? He’s not going to pick up any more votes by doing it, and as was stated above, he’s guaranteed a strong chance of re-election without lifting a finger given his opponents.

      2. just me

        Yves, does this screw the FHFA inspector general? Per your post from December:

        FHFA Inspector General End Runs DoJ, Joins Forces With New York Attorney General Schneiderman

        So what does the FHFA inspector general do, certain that Eric Holder will ignore any misdeeds he finds? Turn to another prosecutor who can bring cases that can bring cases that are national in scope.

        1. Yves Smith Post author

          The IGs are independent, so if this is indeed as bad as it looks, this is more a lost opportunity for the IG. He had thought Schneiderman would help carry forward an investigation, it will now be subsumed in this kabuki.

    3. jonst

      Jane Doe wrote: “This is also classic Obama.’

      The following was written in the Village Voice by Adolph Reed. In 1998 I believe: “In Chicago , for instance, we’ve gotten a foretaste of the new breed of foundation-hatched black communitarian voices: one of them, a smooth Harvard lawyer with impeccable credentials and vacuous-to-repressive neoliberal politics, has won a state senate seat on a base mainly in the liberal foundation and development worlds. His fundamentally bootstrap line was softened by a patina of the rhetoric of authentic community, talk about meeting in kitchens, small-scale solutions to social problems, and the predictable elevation of process over program — the point where identity politics converges with old-fashioned middle class reform in favoring form over substances. I suspect that his ilk is the wave of the future in U.S. black politics here, as in Haiti and wherever the International Monetary Fund has sway.1 from the village voice by A Reed. “

      1. Jane Doe

        It is not just race. Gays are being set up as one of the new identities to prove one’s liberalness while screwing the public over. Governor Cuomo of New York state who pushed through gay marriage was also pushing through a mostly conservative economic program. Many Democratic governors are doing the same thing. “See I am liberal because I support gay rights. Please ignore the economic policies.” I say this as a gay man who cares deeply about gay issues. Its just that I know when I am being played. So, yes, identity politics is being used. There’s nothing new on either side about that. Reagan did it with White voters. FDR did it with race too, etc. The real issue is that we know longer have anyone on the right side of history doing this. They are all using it for Neoliberalism.

        1. jonst

          I think that was exactly what Reed was getting out…neoliberalism. The context of his article, in this case, was black intellectuals. But he did not, ultimately, see it in a racial context. Just that neoliberalism had a racial component.

        2. Walter Wit Man

          Yep. You’re exactly right. Nailed it.

          Here’s the next liberal hero, if I were to guess: Gavin Newsom.

          Like Kamela Harris or Nancy Pelosi, the are basically right-wingers (neoliberals) with a somewhat liberal pathos. It’s an act.

          That’s also why the one bit of red meat Obama threw the left last year in his grand bargain that extended the Bush tax cuts was DADT. This is something the right and the military probably want (more soldiers) and of course Obama gave the privilege of ending DADT to Joe Lieberman (take that you liberals).

          1. Lambert Strether

            And, not that there’s anything wrong with this, but DADT got a ton of DC staffers on Obama’s side, and, sadly, most of the “creative class” took this as a confirmation that Obama’s heart was in the right place, that he was really liberal, and so on. I’m with Jane Doe on this: “I know when I’m being played.”

      2. Walter Wit Man

        The more I look into Obama’s past the more skeptical I am of his “progressive” bona fides.

        It is interesting how he landed in Chicago and had such immediate support (he evidently answered an job advertisement in the New York Times).

        Also, it’s hard to imagine Obama leaving Business International Corporation in NYC, his first job after graduating from Columbia udergrad, and going to Ralph Nader’s NYPIRG to do recycling work and then on to Chicago to do whatever he did. I will have to read up this time period . . . .thanks for the Village Voice reference . . . I will have to try to find it.

          1. Walter Wit Man

            That’s an excellent description of the political reality–one I agreed with at the time.

          2. Walter Wit Man

            It’s also interesting to see the allegation that Bill Ayers helped Obama write his book in 1995:

            I looked on Amazon for a copy of the original version of the book but couldn’t find it.

            It appears it’s mostly right-wingers who have been looking into these issues so of course they see a communist conspiracy–but to me the more likely scam is the one that Paul Street is referring to. Or something even more sinister . . . .

      3. Can't Make an Omelette

        Thank you – sharp and concise graf. So Reed was critiquing Obama way way back. I certainly had no clue at that time about centrist D’s, blue dogs, the DLC, neoliberals. It even takes a while as you are digging deeper in finding sharp analytical writers, to get a clue about the semantics around “liberal.” I bet a lot of center-left voters, Clinton voters, Obama voters, young undergrads who are not too political, hear “liberal” on their six o’clock news and it flies under their radar whether the word is being used as a shorthand for Friedman or a shorthand for someone in the House Progressives. So if I had had the Reed story in front of me and hadn’t fully fathomed it, I might have read “something something something neoliberal something something,” and thought simplistically, “oh, Obama is liberal. That’s good!”

        What if a primer on the semantics of “liberal” was part of the general-ed requirements at every college, in the interest of critical thinking and voting.

        1. jonst

          Oh it’s there.But ya gotta go to the Ivy League. I guess

          Brown’s essay on Neoliberalism, titled Neoliberalism and the end of Liberal Democracy is great. Can’t find it just right now.I had printed it out. I mean I think the point of all is is less, dramatically less, about conspiracies…(although I never rule them out, either..LOL) and more about pure ideolgoical belief…quietly articulated behind the noise/images of pseudo-demorcracy. The Neolibs believe what the hell they believe and most people are clueless about said beliefs. I don’t mean that in an elitist or pejorative manner. Most people are too busy trying to make a living these days. And dry, complex, texts on neoliberalism are not page turners.

          1. Can't Make an Omelette

            Thanks jonst. Good syllabus! Yeah, for me personally that class sounds like it would hit the spot, but you’re right, something in academia is not going to reach busy people. So let’s forget about college. Actually I thought of a good setting where people hash out semantics and still reach most everyone: it’s the opposing statements about ballot initiatives in the (California) sample ballot booklets. That seems like a medium where I see people saying “don’t be fooled… just because the Puppies, Kittens and Toddlers Act of 2012 is called what it’s called, it doesn’t necessarily do what the other side would like you to believe it does…”

            I’m impressed with the “Pissed-Off Voters Guide” model. I guess they’re mostly in big cities. I could see an impatient voter being handed one of their pamphlets and getting keyed in to the fact that they were about to vote the opposite of what thought they were supporting, because they took some sneaky terminology or labelling at face value. Like they had been unaware about the differing connotations of ‘liberal.’ It’s rare, but I know there have been a few times when I was about to vote, read some materials about a ballot and then said “damn, that was a close call.”

      4. BobS

        The Jan. 1-15 print edition of CounterPunch has an article titled “How Obama Got His Start” which is the text of a speech that journalist Robert Fitch gave to the Harlem Tenants Association on November 14, 2008. Quoting from the introdution by Cockburn and Sinclair, “he set the rise of Obama in the context of a city – Chicago – in the throes of the racket known as ‘urban renewal'”.

        1. jonst

          Yes, I agree. The Chi town connection is both vital, and ironic. It is, to a certain extent, the continuation of the 1968 battle between the ‘hippies’ v. the Daley Machine 2.0. In the guise of Emanuel….but there is no Eugene McCarthy or McGovern, or ghost of RFK, Malcolm, or MLK. And I am under few illusions about RFK…but he took on, or, his spirit took on, something in death he did not possess in life. We are leaderless now. ‘They’ still believe you can’t go wrong ‘bashing a hippie’.

  1. albertchampion

    yes, the ny ag just held out for top dollar.

    it all goes away. he gets his straying unrevealed. the cia’s boy moves on unobstructed.

    1. Neo-Realist

      How do you know that he is as CIA as the last president even though they all do have a certain amount of subservience to the company?

  2. bob

    None of the media plays this week make any sense, something is brewing.

    Schneiderman has to distance himself from this early tomorrow moring, or be covered in shit for the rest of his career.

    US AG fails at his job, brings in state AG.

    I have to wonder what else Schneiderman is working on now. Assuming he beleives in his usefulness as a fed AG comitte member, he and his office will be unavailable for other work AT THE STATE LEVEL, the job which he was elected to do.

    1. Afraid at B of A

      You sir, are correct.

      Obama, needs to take over B of A right away, or he has zero credibility

    2. Up the Ante

      He was reported to have been working on the Indian Point nuclear reactors, a similar silence is held there.

      Legitimising fracking ?

  3. Expat

    This is not an Obama-nation. This is not a Democrat corruption of the system. This is Washington, Wall Street, and all our elected leaders working together to stay rich and out of jail Putting a Republican in the White House would not change a thing.

    This is a PR scam. It is likely that this investigation won’t get past printed letterhead. In any case, no one will be compelled to testify. Anyone who has gone in front of Congress will hide behind that and refuse to cooperate further.

    There are two ways to end this farce. One is armed revolution, which is probably a bad idea. The other is to kill off the banks one by one by boycotting them one after the other, withdrawing our savings and business. Unfortunately,we can’t kill Goldman this way, but we can at least get rid of JP, BOA and Citi for starters.

    1. Up the Ante

      “The other is to kill off the banks one by one by boycotting them one after the other, .. we can at least get rid of JP, BOA and Citi for starters. ”

      Something tells me a boycott will be end-run, as they say.

  4. curiouscliche

    I realize this is pretty much forlorn and stale 2008-based hope speaking, but what if Obama and the DoJ have been slow-walking criminal investigations for the sole purpose of delaying until an election year? Such a possibility would still be a gross abuse of power, but there is an argument that the investigations would effectively destroy the last vestiges of congressional functioning. Since that’s the case, the thinking would be that because nothing will get done in an election year anyway, now would be the optimum time. Of course, it’d be a huge boost to his re-election campaign, too. But yeah, this scenario seems pretty unlikely, and just one more iteration of “11-dimensional chess” fantasizing. That said, it’d be nice to believe that at least Schneiderman has some principles, too.

    Anyway, for anyone doubting that rhetoric and reality could diverge as completely as Yves describes, here is a great write-up of the deception and lies in the education section of the State of the Union:

    1. TK421

      “I realize this is pretty much forlorn and stale 2008-based hope speaking”

      That’s for sure. I’m sorry, but if Obama really wanted to turn this country around, given the immense amount of work to be done the time to start was immediately after inauguration, not a few months before his re-election.

    2. financial matters

      This strange veto gives me a little hope along these lines…


      Amid a snowballing foreclosure fraud crisis, President Obama today blocked legislation that critics say could have made it more difficult for homeowners to challenge foreclosure proceedings against them.

      The bill passed the Senate with unanimous consent and with no scrutiny by the DC media. In a maneuver known as a “pocket veto,” President Obama indirectly vetoed the legislation by declining to sign the bill passed by Congress while legislators are on recess.

  5. Middle Seaman

    It all sounds as a long nightmare. The top gang eventually sticks together and plots against the rest of us. Schneiderman was taking way too much time to annouce anything of importance; his sell out, if it weren’t a charad from the very beginning, took place many months ago.

    Obama’s administration and its supporters are, probably, the most politically corrupt group we have seen since before FDR. That’s real hope and change.

    1. Neo-Realist

      I suspect Bush and Cheney are just as bad or worst. Obama is simply continuing the corruption left in place by the previous administration–with a velvet glove.

  6. Conscience of a Conservative

    For Schniderman the offer was really a Hobson’s choice. He had to accept. He has political ambitions and can’t afford to tick everyone off.

    1. Dietrichdaniels

      “Lanny Bruer and Holder were both advisers on MERS” – Laura, can you provide a link on that? I’d like to know more. Thanks!

  7. Laura

    Lanny Bruer and Holder were both advisers on MERS. The law firm they hail from wrote up the legal opinion. This is beyond sick. They both helped orchastrate the entire fiasco and will not proscecute as well as preventing anyone else from doing so. Both belong in prison.

    1. CaitlinO

      Holder and Breuer were partners at Covington and Burling which wrote opinion letters endorsing the electronic registry of MERS but it’s not been reported, so far as I’ve seen, that they personally were involved with MERS. If there have been other stories indicating their involvement, I’d like to see them.

    2. Conscience of a conservative

      which is why it’s not reasonable to expect Holder or Breuer to go after the banks. Obama is the bigest corporatist ever judging by the people in his administration.

  8. Cody Willard

    Posted this on today’s links by mistake. But anyway…you guys are shocked shocked to find out that am elected ag was playing ball the whole time? Seriously when we will learn?

    ” Cody Willard says:
    September 6, 2011 at 7:23 pm
    From Elizabeth Warren to Tom Miller, how many times have we built up one of these Republican/Democrat elites into a supposed anti-elite force who “might be the only elected official willing to stick his/her neck out” only to see them cave and then have to backtrack our embrace of said hypocrite. How long til we/you/I have to admit that Schneiderman is just another spoke in their wheel who is playing their game and simply faking their resistance?

    I had hoped Elizabeth Warren would join with Ron Paul or something so that we could finally end this false Right/Left/Repub/Democ paradigm…and I had hoped Tom Miller really would “send some of these bankers to jail”. Now we have Warren trying to paint herself into a Democrat-pay-for-play Senate seat and of course Miller’s backtracking from prosecutor to crony is legendary now among the educated blogosphere.

    Schneiderman will betray us all in a similar fashion — he is fully endorsed, stamped and funded by the same Republican/Democrat Fascist Regime as the rest of them.

    Our only chance is to go post-partisan and vote exclusively away from the R/D paradigm. How hard can that really be?”

  9. Nathanael

    At this point, I’m not sure Schneiderman needs to do anything; it’s in the hands of the state courts, the precedents are falling against the fraudsters, and the investors are starting to sue.

    Still, sad news.

  10. Woodrow Wilson

    Until these people (politicians, bankers, anyone enabling fraud, etc.) are swinging from lampposts, as a warning to future generations, all the criticisms and harsh language in the world isn’t going to matter.

    The looting and pillaging will continue, as planned.

    1. Nathanael

      We’re warning ’em that if they want to live peaceful lives, they’d better start behaving themselves — or they will swing. I won’t do it, but someone will.

  11. Aaron Layman

    Nothing suggests you are incorrect in your skepticism Yves.

    Obmama is such a gifted speaker that you almost start to believe what he’s saying. Then you are faced with the reality of what he’s actually done since taking office.

    If Obama truly wanted an investigation, he would replace the place Holder, and appoint William Black to head the financial fraud task force, providing him with a few thousand FBI agents.

  12. Michael

    I don’t know if Schneiderman has sold out. I do know that, per Sir Humphree Appleby of “Yes, Minister/Prime Minister”, “One must get behind someone before one can stab them in the back”. This sure looks like another Obama co-option just like the 50 state AG investigation and another bid to pervert the purpose of the investigation to serve his bankster buddies.

    1. Thorstein

      So Obama calls up Schneiderman and says, “Hey, Eric, the Democratic Party needs you to stop prosecuting for a year, come to Washington, and help our on our re-election campaigns.”

      What’s Schneiderman gonna say? “No thanks, Barry”? Eric wants to be Guv of NY someday, and if he refuses to help the Party get re-elected, well, it’s not just Barry, but every two-bit NY politico who wants to ride Barry’s coattails. What’s he gonna do? Say, “No, I think I’ll become a Republican”?

      Should he stick by his principles and abandon aspirations to the guv’ship? I dunno. I’d support him for guv–maybe he just had to bend over. It is all like Sir Humphree Appleby said, but it’s unclear to me who’s getting behind whom here…

  13. Greg R

    So now Schneiderman is turning tricks. Can any of us be all that surprised? As this was drawn out and drawn out, weren’t we all losing a little faith everyday?

  14. Joan Dark

    Yves, send me an e address. I think I understand ‘why’ everybody eventually ends of playing ball. You have to look behind the curtain, under the rug, and at the intent behind the absurd.

  15. The Hube

    What’s in it for Schneiderman? Here’s my guess. I think Holder is ready to cash out after the election, and O has told Schneiderman he can be next in line if he plays ball and if O is reelected.

  16. Tim

    My sense is Massachusetts is still trouble for the banks and Obama. Coakley at this point has nothing to lose by going all out and the court precedents specific for Massachusetts are not parrticularily good.

    1. Tim

      The one thing that concerns me is no one has filed a supplemental brief with the SJC(not Prof. Leivitn or Coakley’s office)in the Eaton case. I have always suspected Team Obama would put unbearable pressure on anyone from the progressive side not to intervene in Eaton vs FNMA as a loss in this case would be devasting for Fannie and Freddie business in Massachusetts.

  17. Cate

    I am a retired New Yorker with a B.A. in Economics. Just a citizen. Thanks for your courage and thorough coverage of the banks, mortgage mess, etc. I read your comments daily and just wrote to Schneiderman’s office telling him he has lost my vote. Like many I lost a job, etc. I am just a voter. I will make a contribution today to your site.

  18. Maureen

    Anything Schneiderman uncovers in conjunction with this “special task force” will be held confidential by DOJ. This appointment can be seen as giving him a leading role on the sidelines, while he might have thought it would look good on his resume.

    1. Up the Ante

      Confidential, as in whatever David Paterson did to “save” AIG ?

      “Saved” AIG while setting up conditions allowing the sale of NYS to the frackers.

  19. Cate

    I just contributed a small donation – as much as I could afford today. Hopefully, many like me will do the same. Your coverage/analysis is terrific.

  20. Jack Straw

    As of today, January 25, 2012, much of what happened before January 25, 2007 is time-barred against federal prosecution or enforcement of federal laws by states, with the following interesting exceptions which have a 10-year statute of limitations (SOL):

    Bank fraud (scheme or artifice to defraud a financial institution). 18 USC 1344.

    Mail fraud (using the mails for a scheme or artifice to defraud). 18 USC 1341.

    Wire fraud (using wire, radio, or television in a scheme or artifice to defraud). 18 USC 1343.

    Violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 USC 1962, that is predicated on bank fraud under 18 USC 1344.

    Receipt of commissions or gifts for procuring loans. 18 USC 215.

    Theft, embezzlement, or misapplication by bank officer or employee. 18 USC 656.

    Embezzling funds from a federal financial institution. 18 USC 657.

    Falsifying bank records (reports, entries or transactions). 18 USC 1005.

    Falsifying records of a federal financial institution (reports, entries or transactions). 18 USC 1006.

    Falsifying, forging, or counterfeiting a statement to the Federal Deposit Insurance Corporation (FDIC). 18 USC 1007.

    Making a false statement or report, or overvaluing assets for a federal loan. 18 USC 1014.

    Making a false statement or report, or overvaluing assets as it relates to insurance and a financial institution. 18 USC 1033.

    I suspect there will be a lot of activity in going after foot-soldiers, Iyves. But, the investigations of the Capos will run out of time. And notice that items on this list seem to share the trait that they will likely implicate only lower-level folks.

    Look for the little[r] fish to fry, and the big ones to get away.

    Note: state law varies, but frequently has a shorter SOL.

    1. Walter Wit Man

      Yep, this is the final hurdle, in all likelihood (unless they can relate back a conspiracy beyond 10 years, etc.).

      So speculating that the major crimes at the higher levels occurred between 2003 to 2005,* the perps just need to get through one more election. If Obama wins (or Romney for that matter), his AG will be in office until 2017. I wouldn’t be surprised if Schneiderman just agreed to take the job and be a good boy.

      Meanwhile, the states are losing the ability to prosecute anything going back to 2008 or 2007 or so. Also, the SEC has destroyed evidence and the state AGs haven’t issued subpoenas nor am I aware of any real evidence that can be used in a trial. Some one *should* have been building a case.

      *I think this time period is close as far as liar loans go–I don’t know when MERS practices started, earlier, right, like back to the late 90s? But the MERS was ongoing so I bet it would be easy to relate back a conspiracy but I’m just brainstorming here and would have to look into it.

  21. Lambert Strether

    5 x 7 glossies? Is that what’s in it for Schneiderman?

    Am I the only one who thought that having Schneiderman sit in Michelle Obama’s box was unseemly for a putative investigator?

  22. Sharon

    When I saw the announcement I first looked here to see what the real story was because I am, like you skeptical. Unfortunately for all of us you hit the nail on the head. We have another problem to add to already burdened country. Eric Holder should resign and his buddies too. Is it too much to ask that Obama do something, anything? What a crock.

  23. Norman

    If it works, then the “O” gets another feather to add to his bonnet. Let’s not forget the he -the “O”- is a member of the 1% club, so, need anyone say more?

  24. Aquifer

    When i first heard about this last nite in an e-mail from a friend – that was my first thought – O derailing S investigation by neutering him.

    Keep your friends close and your enemies closer …

    H. Clinton as Sec of State, E. Warren as head of committee, E. Schneiderman on task force, I’m sure there are more, the pattern is clear.

    For those he doesn’t “appoint” he shakes down – Kucinich on Air Force One, and for those he can do neither there is always a drone …

    Mr. No Drama Obama is a cool player – cold, calculating, arrogant – who says this guy wouldn’t make a good CEO in the psychopathic tradition? When WS picked him – they knew one of their own, not just in sympathy or interest, but in “character” – takes one to know one …

    Do not understand continued praise for his “oratorical skills” – fool me once shame on you, fool me twice, shame on me. the sad part is we are far beyond twice ….

    1. Lambert Strether

      That schtick where he made his voice go soft and husky to show sincerity didn’t work for me. The great thing about Bush is that you knew what he was. With Obama, you’ve got to keep reminding yourself. That doesn’t make him a great orator. It does make him a top-grade con artist.

    2. Doug Terpstra

      Schneiderman may well have received an “offer he couldn’t refuse” from Lender Processing Services, like news-wrapped fish or a severed horse head between the sheets. Recall the death of Notary Tracy Lawrence who would have been a key witness for Nevada’s AG against officers of LPS in a massive mortgage fraud scheme. The blood toxicology report on her inexplicable suicide is not yet out.

      Indeed, “… this looks to be yet another clever Obama gambit to neutralize his opposition.” If only we knew the real story behind Schneiderman’s sudden capitulation / co-optation.

  25. Mark

    Other than getting some payback from BAC for the 10k jobs they eliminated in Delaware after taking over MBNA I can’t see any other reason why one would expect Beau Biden, son of Obama’s VP Joe Biden, to hold out if Schneiderman doesn’t.

    1. Frank Miata

      Perhap we are being too shortsighted.when one sees AG Schneiderman on the tube, he looks like Governor in Training Schneiderman. Cuomo is an ego maniac and will seek higher office soon. Schneiderman will need the Democratic Party’s money and foot soldiers for his political ascent.
      I know this sounds too calculating…not really. Bo can go his own way because he knows that the administration is going to kill this investigation with a blanket settlement. Meanwhile, he gets to look good. What’s not to love about this hosing of the breakaway AGs efforts at really accountability.
      Sad to say that Obama is using Schneiderman now; Schneiderman is calculating he will be able to call in the favors when Cuomo moves on to D.C.

  26. ep3

    maybe schneiderman was more willing to bend than spitzer. maybe one threat of “we will reveal your mistress if you don’t go along” and schneiderman yielded. whereas maybe spitzer wouldn’t back down to threats.
    or maybe they promised some BS position in the party or administration where he could reap millions and not have to work.

  27. brian

    the democrats nixon
    actually i’m beginning to think nixon wasn’t so bad
    and i’m a lifelong democrat
    voted for every democrat since ’72

  28. Jeff Boyd

    So Schneiderman has been NY AG for a year now (with the Martin Act behind him) and I’m pretty sure he had access to some pretty good files to begin with. If the fraud is pervasive how come he hasn’t brought a case?

    Maybe he is too busy attempting to protect the State of New York from corruption/incompetence charges by stonewalling in an a legal case brought against MBIA Insurance to unwind a state approve shifting of assets between legal entities that was made in an effort to stiff bond holders.

  29. aletheia33


    i hope you get some decent rest after your splendid, hard work on this breaking issue.

    you are now leading the people’s effort to see justice done by the 50-state a.g. “investigation,” and you are serving the cause of justice on this important issue with far more diligence than the vast majority of officeholders of our nation.

    you are a true journalist serving the best interests of the citizenry, and deserve a pulitzer. and your readers all know it.

    events will continue to unfold, and you will continue to be at the forefront of what is right. you have many, many followers and supporters cheering you on. we will not be ceding defeat any time soon to the forces of what george soros has recently named as evil (a word i do not use lightly).

    whatever this apparent setback/surprise leads to going forward, we already know we are in a hard place that is going to be getting much harder. we will not give up or be discouraged. we are very happy with your service to us. i hope that remembering this will help you through this difficult moment.

  30. Hugh

    Invoking my Mukasey rule, no one with a shred of integrity would work for an Administration that has none. Progressives do this all the time anointing whoever makes, or even just seems to make, the least gesture in their direction the next great hero.

    Schneiderman came up through the Democratic party in New York. Before becoming Attorney General, he was in the State Senate for 10 years. He ran the Democratic State Senate election committee and in 2010 was chosen by the party to run for AG, a position that the previous AG Andrew Cuomo had used as a springboard to the Governorship.

    Do the math. If Schneiderman were a real reformer and progressive leader, he would be out there taking on Obama and the Democrats. But he’s not. He’s working with them and by doing so explicitly endorsing both. Here is Schneiderman’s statement from the New York AG website on this:

    “I would like to thank President Obama for his leadership in the creation of a coordinated investigation that marshals state and federal resources to bring justice for the victims of the misconduct that caused the mortgage crisis.

    “In coordination with our federal partners, our office will continue its steadfast commitment to holding those responsible for the economic crisis accountable, providing meaningful relief for homeowners commensurate with the scale of the misconduct, and getting our economy moving again.

    “The American people deserve a robust and comprehensive investigation into the global financial meltdown to ensure nothing like it ever happens again, and today’s announcement is a major step in the right direction.”

    If you want the short version of this, and the only one the Administration is interested in, it runs something like this: “I would like to thank President Obama for his leadership blah, blah, blah, blah.”

    Essentially, Obama has Schneiderman on board through the election. Yes, he has been neutralized. On top of this, Obama can use the Schneiderman endorsement as a bit of gloss on his non-existent progressive credentials. And Obama did this while giving away nothing of substance, at least nothing of substance from a corporate point of view.

    There are a few lessons in this. The first is that a reformist Democrat is an oxymoron. The second is that progressives should grow up. There are no heroes who are going to come along and save us. If we are going to be saved, we are going to have to do it ourselves.

  31. frobn

    I really have to stop reading your blog, mish’s blog, chris’ blog etc. Every time I think it can’t get any worse, the ‘worse’ doubles. I am going to buy several cases of tequila sit back and be happy while I wait for the crash. Slow or fast doesn’t matter.

  32. JTFaraday

    “A lot of soi-disant liberal groups have fallen in line with Obama messaging, which was the plan (I already have the predictable congratulatory Move On e-mail in my inbox).”

    Shouldn’t be too hard to put over on the D-Base. Anything handled by fedgov is automatically more progressive, by definition, because the South justified slavery with states’ rights.

    I don’t know. This logic works for them. Who is going to be in charge of all that concentrated power at any given point in time is just a trivial afterthought.

  33. Lloyd C. Bankster

    Schneiderman was not an easy politician to buy off. Usually one phone call is all it takes, 2 or 3 minutes between the T-shot and the green and it’s all over.

    But not Schneiderman. Before agreeing to be bought he wanted $10,000 as well as sex with Andrew Ross Sorkin. So I call up Andrew Ross, and get this, before agreeing he wanted $12,500 as well as sex with Ezra Klein.

    There was no way I was giving in to that kind of extortion.

    I finally got the three of them to agree to a circle jerk and 750 dollars each, but boy, it took me a number of phone calls, some skillful negotiating, as well as a missed put on the seventh hole at the Sebonack, resulting in a double bogey on this 412-yard par 4.

    1. Lloyd C. Bankster

      Follow-up: After hearing what Schneiderman got for selling out, Roger Lowenstein just called me to complain that all he got for that piece of dogcrap entitled “Wall Street: Not Guilty” was a lousy $750 and sex with Neel T. Kashkari.

  34. Enraged

    When Louis XIV of France built Versaille, it was with the purposeful intent of housing -and keeping a close watch on- the most influential people in the kingdom and the most susceptible to participate in comspiracies and to plot against him. It served him extremely well: the longest reigning monarch in Europe, he died of old age at 77, after having ruled for over 70 years, at a time when many kings were assassinated.

    When president Obama gave a very vocal Hillary Clinton the position of Secretary of State, I reminded my husband of Louis XIV. He pooh pooh’d it.

    When, last night, Obama announced the creation of some task force that Eric Scheiderman would co-chair with Lanny Breuer, I was satisfied that Wall Street will not be investigated nor prosecuted. Why? Lanny Breuer is not your run of the mill Covington & Burling former employee. He just happens to have been the chairman of the white-collar crime DEFENSE division of C & B.

    I believe the intent is to cut Schneiderman’s wings. “Keep your friends close and your enemies even closer”. If I am right, we’re in for a very long year and, I’m afraid, a bloody one. Demagogy will not fix our economy and it will not restore the American people’s trust in government. Empty promises and increasing unjustice is what civil wars are made of.

    We have serious reasons to be concerned.

  35. different clue

    I could speculate all I want to from way out here in Michigan about what motivates Scheiderman all the way back there in New York.

    People in New York already know what to say if they call.
    Could people outside New York be of any use in such an effort? If people from other states were to call and say that we were counting on Schneiderman to lead the Rebel AGs in pursuit of the Nobama Nosettlement and that if Schneiderman really goes over to the Obama side then they (we out-of-state callers) will give money and time to Schneiderman’s opponents in every election Schneiderman ever has ever again, would that restore Schneiderman’s mind to its former position?

    Is that something good to do? Or something better left to the unasisted people of New York?

    1. Up the Ante

      “.. would that restore Schneiderman’s mind to its former position? ”

      You may as well consider him to be a deflated balloon. Popped, even.

      1. different clue

        Well then, people outside New York could still support Schneiderman’s every opponent at every step for the rest of Schneiderman’s “career” in elective office-seeking. It would at least be visible revenge and perhaps a lesson to future Schneiderman wannabes.

  36. flory

    It’s hard to see what the Administration could offer him to get him to compromise his independence (which this effort will, no matter what he has convinced himself).

    Holder’s job in a second Obama administration?

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