While a large number of “liberal” groups, ranging from the official Democratic party outlets (the Center for American Progress) to ones that sometimes cross swords with the Administration (MoveOn, the Working Families Party) praised the Tuesday evening announcement of mortgage “investigations” with Schneiderman co-chairing the effort, others who have been watching the mortgage legal fight closely were far more ambivalent about the creation of a new unit in an initiative …which has done pretty much nothing since its creation in 2009 (boldface mine):
Attorney General Eric Holder, Treasury Secretary Tim Geithner, Housing and Urban Development (HUD) Secretary Shaun Donovan, and Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro today announced that President Barack Obama has established by Executive Order an interagency Financial Fraud Enforcement Task Force to strengthen efforts to combat financial crime. The Department of Justice will lead the task force and the Department of Treasury, HUD and the SEC will serve on the steering committee. The task force’s leadership, along with representatives from a broad range of federal agencies, regulatory authorities and inspectors general, will work with state and local partners to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims.
The task force, which replaces the Corporate Fraud Task Force established in 2002, will build upon efforts already underway to combat mortgage, securities and corporate fraud by increasing coordination and fully utilizing the resources and expertise of the government’s law enforcement and regulatory apparatus. The attorney general will convene the first meeting of the Task Force in the next 30 days.
The New York Times, which has been a staunch supporter of Schneiderman when he was sticking his neck out, is taking a “yet to be convinced” stance:
There is good reason to be skeptical. To date, federal civil suits over mortgage wrongdoing have been narrowly focused and, at best, ended with settlements and fines that are a fraction of the profits made during the bubble. There have been no criminal prosecutions against major players. Justice Department officials say that it reflects the difficulty of proving fraud — and not a lack of prosecutorial zeal. That is hard to swallow, given the scale of the crisis and the evidence of wrongdoing from private litigation, academic research and other sources.
This new investigation could be the real thing…
For now, the administration is saying that the new investigation and the settlement talks will both proceed. It would be better to settle with the banks only after officials have a full picture of any and all violations.
There are reasons to be wary. Some of the federal officials who will also be involved with the investigation — including Eric Holder Jr., the United States attorney general, and Lanny Breuer, the leader of the Justice Department’s criminal division, who will be a co-chairman — have not distinguished themselves in the pursuit of mortgage fraud.
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.
The Times identified the two red flags. First, why are the settlement talks still proceeding? This is ridiculous if the plan is to do investigations. The fact that they have not been halted calls this exercise into question. Second, if this is supposed to be a heavyweight investigation, why hasn’t Obama set up an independent prosecutor, a role much more likely to attract the sort of kick-ass litigator that the Times correctly thinks is necessary for the job?
One good sign so far is that the key attorney generals do not seem to have been deterred by Schneiderman joining the Federal effort. Note that the New York AG has made a shift in posture that has not been lost on his fellow AGs, even though the media may not have called attention to it: he has gone from being part of the opposition to now officially willing to consider a deal provided the release was narrow (this is not just my surmise; I’ve heard this from a contact in a position to know). That of course would provide cover to any of the dissenters who decided to relent. This IS meaningful win for the Administration, and I’m not certain Schneiderman understands he has traded away a major bargaining chip (his opposition) for a hope and a promise from the Obama camp.
Beau Biden, in an interview on Dylan Ratigan show, came pretty close to dissing Schneiderman by reaffirming his opposition to a settlement (he wants to pursue his outstanding litigation), praising his fellow dissenting AGs, and raising questions about what an investigation would need to have to be credible (and all those elements seem to be lacking):
Kamala Harris has also said she is not settling (the problem with Harris is that she is still seen as less firm in her stance than the other opponents):
Calif. Atty. Gen. Kamala D. Harris’ office has called a proposed $25-billion settlement with the nation’s mortgage industry “inadequate.”
“We’ve reviewed the details of the latest settlement proposal from the banks, and we believe it is inadequate for California,” Shum Preston, a spokesman for Harris, said in a statement. “Our state has been clear about what any multistate settlement must contain: transparency, relief going to the most distressed homeowners and meaningful enforcement that ensures accountability. At this point, this deal does not suffice for California.”
So the Obama camp has not yet scored a decisive victory, and it seems almost desperate to put out any bit of progressive-seducing information it can put out (Geithner’s “the President won’t invite me back” statement today was another clever bit of PR, since it was Geithner who said he wanted out more than a year ago, and it was Mr. Market, not Obama, that objected. And remember, this wicked witch is not dead, and can do a lot of damage, particularly if he is in the saddle when a Eurocrisis hits). But this was an extremely clever tactical move. Too bad Obama can’t seem to muster the same level of interest in solving problems as he can in managing optics.