Politico: Schneiderman Caved to Administration Pressure on Mortgage Settlement, Did Not Get Tighter Release for Abandoning Opposition

If you were following the mortgage settlement negotiations, it was very clear than the decision of New York state attorney general Eric Schneiderman to abandon his role as the de facto leader of the opponents of the agreement, join a Federal task force to investigate mortgage abuses, and go silent on where he stood on the negotiations put the dissenters in disarray and enabled the Administration to push the deal over the line.

While this blog has repeatedly pointed out that Tom Miller, the Iowa attorney general and leader of attorneys general in the settlement negotiations, is not the most credible source, the flip side is that the description of the release in the Administration’s own propaganda website strongly suggests that the release of bank liability is broad, rather than narrow, as deal cheerleaders claimed.

If you take this section of an article at Politico, “HUD boss jumps into mortgage melee,” (hat tip reader Deontos) at face value, you can only draw damning conclusions about New York attorney general Eric Schneiderman’s role:

Schneiderman, whose Lower Manhattan office overlooks Zuccotti Park where the Occupy movement began, felt like he was being strong-armed by Donovan and wasn’t shy about sharing his dissatisfaction. In late August, The New York Times reported that Schneiderman had come “under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices.”

That did it for [HUD Secretary Shuan] Donovan, according to people close to him. Worried that the settlement was in danger of falling apart, he woke up at 5 a.m. the next morning and sketched the outline of what would emerge as the final compromise plan.

A bit later he called Schneiderman, who immediately began re-arguing his case for holding banks accountable.

Donovan stopped him: “Look, hear me out, I want to get past this,” he said, and proposed creating a special panel to probe wrongdoing by banks, to be co-chaired by Schneiderman. He also promised to limit the scope of any releases granted to the banks and rewrote his draft.

Miller, who clashed with Schneiderman over the releases, said Donovan didn’t make many changes but was artful enough to sell it as a compromise to the New York attorney general, who wanted to seal the deal.

“Essentially what Shaun did was let Eric take credit for shaping the release,” Miller said, “credit that wasn’t factually correct.”

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  1. Rotter

    This is the model over and over and over again with the New scumbag-politics. This jerk is the latest. He’ll probably run for the Senate now as a Jackass a la Elizabeth W

    1. Doug Terpstra

      Ditto for Beau Biden, Kamala Harris, etc. Their chest thumping was only really about campaign bribes and faux populist publicity. They are learning perception management from Reagan v2.0 — Barack Obama. Like Obama, most politicos are consummate liar-lawyers, winsome smiles and loquacious hot air.

      We’ve clearly attained the pervasive corruption of the Roman Empire before its sacking by Visigoths — and possibly even the wickedness of Sodom and Gomorrah. In anguish over the imminent destruction of those cities, Abraham pleaded with the notoriously vengeful Jehovah not to smite them if there were only fifty righteous citizens. But apparently worried, he kept right on negotiating until at last he hit ten. And God agreed in the end to suspend mass destruction for even ten righteous. But we know how that ended. Our own violence and avarice seem to have reached similarly biblical proportions.

  2. JimN

    “That’s a drop in the bottomless bucket of the nation’s housing crisis. But for the first time, the banks set aside their vehement opposition to writing down the principal of loans — and that could be a big deal if it becomes a precedent.”

    Ha ha ha! Yep, we’re going to see wave after wave from now on…

  3. psychohistorian

    This is what imperialism looks like on the inside.

    You cave to pressure or you die. Take your pick.

    Does anyone still believe that some knight in shining armor is going to bring the global plutocracy that controls our world to task for their transgressions against the public?

    It certainly is looking like we will get increased repression, violent repression as the next step in this global effort to socialize financial losses. Look at Syria. What is going to happen in Greece?

    2012 is not going to be dull.

    1. Up the Ante

      “Does anyone still believe that some knight in shining armor is going to bring the global plutocracy that controls our world to task for their transgressions against the public? ”

      Now, now, psycho, Justice Dept. employees have families to feed as well (as any others, lol).

    2. jonboinAR

      >>Does anyone still believe that some knight in shining armor is going to bring the global plutocracy that controls our world to task for their transgressions against the public?<<

      I think we'd have a chance of it if we ever got our you-know-what together. At least our constant yacking in the blog-o-sphere may have been slightly affecting the narrative. We need considerably more organized effort, methinks. I made one very feeble attempt, myself, that didn't go anywhere. Then I ran out of steam, got distracted by a small shiny object or something.

      Someone, come up with a plan of action!

      1. bhikshuni

        The Occupy activists, student loan debtors, mortgage debtors, working poor, (who may be all of the above), etc., can not succeed in efforts to drive discourse and media attention to the correct and most effective objects without the Yves Smiths and Bill Blacks and NC contributors.

        This is just a simple fact. Just being there IS significant (even with distractions to shiny objects).

        Getting your voices out more, not only commenting at NC, but also at university colloquia, via newspaper editorials, Real News Network, regularly and consistently will help even more.

        And even if and when measurable impact is negligible, at least you serve to clarify on the smoke-and-mirrors game with the public and historically document the situation for future generations.

        Thanks for that!

  4. Christopher Fay

    How do I check to see if my Massachusetts A G caved too? Heavily democratic state, “it’s Ted’s seat” was the battle cry when there was a special election to replace him after he died. The correct phrase, of course, is “it’s Massachusetts’ seat.”

      1. GnomeDigest

        The OK AG didnt think the banks should be held accountable for anything. It wasn’t a case of the OK AG thinking the deal was bad for the people and held out.

  5. timotheus

    Enormously sad. As a resident of Schneiderman’s old state senate district who watched him work quietly for many, many years to dismantle the hateful Rockefeller drug laws, I always pointed to him as that rare exception — a principled toiler for the underdog. To see him buckle this way is very disheartening. Unlikely that it would have occurred under a Republican administration, another lesson in how dangerous it is to have a phony liberal in power. Next stop: war on Iran.

    1. John Regan

      I can’t blame him too much. Look what happened to Spitzer, and he had many millions to fall back on. This is always the implicit threat in high level politics: you’ll be ruined. One way or the other.

      We can’t really put it all on any one man or small group. There has to be a surge for change coming from the hoi polloi.

    2. Nathanael

      I’m not even sure this matters. Schneiderman may have decided that the things to push on were exactly the things left out of this: the criminal charges, the defrauding of the counties, etc.

      But I’ll believe that when I see Scheiderman file criminal charges.

    1. TK421

      Obama or a member of his administration strong-arming someone who is in the wrong is hard to believe. But strong-arming someone who is trying to do the right thing is something they have a long history of doing.

  6. Phoebe Loosinhouse

    I think many people are missing a larger point.

    This was supposed to be a law enforcement action/criminal civil/ investigation conducted by the Justice Department and the State AGs to address the abuses/crimes/frauds perpetrated on the American public by the foreclosure and mortgage servicer industries. It is apparent that early on it morphed into just one more mortgage settlement/rehab program and any goals related to actual investigation and punishment of crimes committed was thrown to the winds. You have to ask, why was Justice even involved? Their major function in this “investigation” seems to have been to immunize the industries against actual prosecution.

    The question remains – what the hell were they doing for 16 months if not investigating, issuing subpoenas, and being engaged in a giant state of discovery? It appears that the work some of the AGs were doing on their own were far more fruitful prior to them all being rounded up and corralled into this pointless, toothless, Potemkin, political cover-up.

    Then,long towards the end of this charade, we have Donovan getting up one morning and “sketching” the final settlement?

    I have no words for the disgust I feel on behalf of the homeowners of America, who got NO relief or justice from this absolutely pathetic and laughable effort by all those involved.

    1. Up the Ante

      “Then,long towards the end of this charade, we have Donovan getting up one morning and “sketching” the final settlement? ”

      Skits-sketching. Please use correct terminology.

    2. Walter Wit Man

      Yeah, I love that detail of him sketching shit out at 5 a.m.

      Well, that cinches it for me. I’m convinced!

      These guys simply have to be sincere. They are taking their work home with them and they can’t sleep at night.

  7. SidFinster

    I thought all the AGs caved, except for Oklahoma, which made a side deal?

    Somehow, I don’t think Republican or Democrat has much to do with it. For that matter, our hopey-changey administration is leading the charge to sign on to this abomination.

    1. Gerard Pierce

      As I recall, Oklahoma rejected the deal because Oklahoma believed that the banks should suffer no penalty or investigation at all.

      1. Brooklin Bridge

        Exactly! It may not be a position one agrees with, but at least it is not a hypocritical unmitigated sellout.

  8. Ed

    The commentator Phoebe Loosinhouse made a good point above, on something I’ve been wondering about.

    What is the head of the federal Housing department doing negotiating with the state attorney generals in the first place? I understand that HUD is concerned with housing policy on the federal levels. A state AG should be concerned about whether the laws of his/ her state were broken. If a state AG negotiates a settlement with the defendants (is HUD a defendant in this case), it should be to avoid the risks and costs of going to trial, not to keep the housing bubble inflated. And if the policymaking parts of the federal government really, really want to reinflate the housing bubble, the fact that many of the bankers who inflated the housing bubble originally are being prosecuted for fraud should be something that they just have to work around, maybe by pushing for legislation retroactively legalizing everything, fraud being such an important component of having a housing bubble.

    So if I understand this right, the federal executive can arm twist state prosecutors to forget about enforcing certain state laws for policy reasons? And this is not in one or two corrupt instances, but out in the open as a major federal policy initiative?

    1. diptherio

      “So if I understand this right, the federal executive can arm twist state prosecutors to forget about enforcing certain state laws for policy reasons? And this is not in one or two corrupt instances, but out in the open as a major federal policy initiative?”

      Now you’re getting the picture. Laws are for those dumb enough to care about them and/or weak enough to have to abide by them. The upper echelons of our social hierarchy have come down with a nasty case of Gresham’s Dynamic, with the results that the white-collar crooks can pretty much scratch each other’s backs in public now without the press or public so much as raising an eyebrow (http://rockymt.org/?q=node/288). More people are waking up to this reality, thankfully, but it can be a difficult truth to admit as it requires a kind of losing-of-faith for many people.

      A few years ago I spent two weeks going through de-classified intelligence documents on the National Security Archive website…nothing surprises me any more.

  9. 2laneIA

    In the Politico article, Schneiderman goes from “appalled” to signing up. Nice backflip. I also love the backstabbing dig from Tom Miller, showing once again what he is. Obviously there is no love lost between them.

    Too bad Schneiderman threw away his credibility. He probably has ambitions that could have been strongly supported by the grassroots if he had had the courage of his convictions. Now he is just another weak pol.

    1. Gerard Pierce

      If the grass roots had any power, Obama and the Democrats would have gotten the message and they would have back-flipped themselves.

      Schneiderman just recognized that there would be no one out there on his side when the political bill came due.

      What’s surprising is that he was able to hang in as long as he did before he was forced to compromises.

    2. Walter Wit Man

      I bet you Schneiderman and Miller get along just fine. They are simply playing slightly different roles but are both in the same acting company. They probably enjoy having a beer after the show like most actors.

      In fact, they probably relate to each other because they are both playing the biggest role of their lives–it’s just that they are supposed to be antagonists.

      Kind of like how I’m sure Sylvester Stallone was friendly with the guys that played Rockey’s opponents.

    3. orionATL

      schneiderman was promised something, aka “bought”.

      you can count on that.


      i have no idea.

      a cabinet post?

      possibly attorney general?

  10. brian

    so how’s that hope and change working out for y’all?

    from jesse

    think this is about as good a statement of the problem facing the US economic system today.

    The ‘checks and balances’ and ‘equal protection under the law’ of the Constitution has been trampled upon by the monied interests. The obsessions of the few will not permit them to relent on their quest for all the marbles, even to a Pyrrhic victory.

    In addition to the massive mortgage and foreclosure frauds, I can think of no better recent example than the looting of the customer accounts at MF Global, the manipulation of justice, and the subsequent cover up, because it is so senseless.

    And if it destroys the futures markets in the process, as the members of the Futures Association fear, then so what?

    We won, didn’t we?

    Why can’t the Bank give back the customer money which they accepted in the last week of business? A billion dollars is small change, especially as they are sitting on a pile of unearned loot taken by fraud from the public already, and the price to be paid in the long run for it may be great.

    Why don’t serial killers ever quit? Because it is a matter of principle to them, the principle of pride, the pride of all those masters of the universe who consider themselves to be above all the rest, supra-human, the best. To give it back would be to admit that they are equal after all, merely human, and subject to the laws of the people. And the will to power that fills the hole in their being will not allow it. They need, and that need must be fulfilled, no matter what. What I must forego diminishes me. And to bend my knee to anything or anyone is a blasphemy against my self.

    “Do what thou wilt shall be the whole of the law.”

    Aleister Crowley
    Have we not proved we were smarter, better, different from all the rest, these creatures whom we use and despise? And if these sub-humans prove to be troublesome, we will disparage them, silence them, beat them, corral them, and even burn them.

    We are the gods of this age, the great angel of the morning, sitting on a wreckage of devices, gaping in the light.

  11. Hugh

    Schneiderman was just another hero du jour. Revolving heroes are just a distraction. Their whole purpose is to establish a little credibility without actually doing anything significant and then using that credibility to burnish the brand of one of the two otherwise thoroughly discredited parties. These political pantomimes also keep the 99% of us engaged and invested in a corrupt system and process. They keep us believing in the possibility of reform, and most importantly they keep us from organizing and concentrating on throwing out our whole political class.

    Schneiderman didn’t cave. He played his part. To cave, Schneiderman would have had to have been acting in good faith up to that point. But Schneiderman did not appear one day as Attorney General out of nowhere, like an actor walking on to the stage for the first time. He had a history as a good party man. It was being a good party man that got him his party’s backing for his run for AG.

    The simple fact is that we live in a kleptocracy and there is no officer or agent of that kleptocracy who is acting in good faith. Not one. We really need to get clear on this and stop wasting our time with it. Schneiderman, Warren, Sanders, Kucinich, as I said whoever the current hero du jour is supposed to be, all work in and for this kleptocracy. They will strut and fret their hour here and there but when their opposition to the powers that be is really needed, when a vote or a statement against would really mean something, they invariably “cave”.

    I mean how many times do we have to see this play before we realize it is the same play. It is like watching “Hamlet” for the twentieth time and thinking that the ending, this time, will be different.

    1. Walter Wit Man

      Hey. This is what I was trying to say, only you said it better!

      But we are drawing the obvious conclusion. The perps are using high level mind control–nothing else explains their amazing ability to keep pulling this scam over and over.

    2. Walter Wit Man

      You’re right that Schneiderman’s character was in development for a while. They purposely build up a perp’s story line to give him street cred–they build his bona fides–so that he is better able to deceive.

      For Schneiderman, he evidently weakened the Rockefeller drug laws (according to comment above). But was this a sincere effort? Something similar happened in CA under a Republican governor. Heck, in California marijuana was recently mostly decriminalized and hardly anyone noticed. They are trying to reduce the burden on the state, is my guess, or they have decided to ease up on the drug laws slowly as they ratchet up the terror laws, etc.. Anyway, I wonder if the drug laws in NY changed quietly, as they did in CA, simply because the elite wanted them changed for some reason and they allowed Schneiderman to take the credit for it.

      They are certainly buttressing his bona fides when they leak these messages to the press that Schneiderman really wants to go after banker fraud. Bullshit. I know for a fact that if an NY AG were serious about this he would have taken concrete actions. Clearly, Schneiderman did not do this and was intending to sell out from the beginning. His actions prove this.

      And not to toot my own horn too much, or yours, but some people were not fooled by Schneiderman in the least. It’s telling that the same people keep encouraging us to have hope for the next great Democratic hope.

    3. Yves Smith Post author

      That isn’t right. Schneiderman became state AG over the dead body of the party. They wanted Eric Dinallo. Cuomo managed to get the state banking regulator’s authority beefed up so he could engage in turf wars with Schneiderman.

      That is why there was reason to think he might follow through. He didn’t owe the party the way you’d assume he would.

      1. Hugh

        Dinallo came in fifth in a five person field and only got 7.5% of the vote. Schneiderman’s real opposition in the primary was Kathleen Rice the DA for Nassau County.

        Dinallo won the support of the Democratic Rural Conference and several Democratic chairpersons but they were almost all from rural low population counties. Rice got the endorsement of the county chair for Nassau county, no big surprise there. Schneiderman’s base was New York City. He got the endorsement from the Times. Dinallo got the endorsement of the Daily News.

        In the primary, Eric Schneiderman got 227,203 votes (34.36%); Kathleen Rice 210,726 (31.87%); and Eric Dinallo got 49,499 (7.49%).

        1. Nathanael

          There was a huge push from the party elite for Rice, who had a record as a tool of corporate interests.

      2. Dylan

        The party’s choice was not Dinallo. Kathleen was largely the part supported front-runner up until the very end. It’s easy to see why Cuomo would want a woman to help balance out largely NYC white male ticket.

    4. Doug Terpstra

      Very clearly stated, Hugh. Democracy theater is like a rotating theater-in-the-round, a squirrel cage. The actors are carefully screened and no one passes an audition without presenting a valid bill of sale for their soul — duly-notarized, not robo-signed.

  12. Walter Wit Man

    I stopped believing these leaded dramas a long time ago.

    Who really knows what happened?

    They probably invented this drama for some sort of agenda.

    Wait, I know, I think I’ve heard it a million times!

    Here’s the story they keep repeating (but change the main actor–from Spitzer, to Warren, to Schneiderman): dogged Democrat reformer really wants to reform, but is thwarted by conniving Democrat centrists who trick him. But even though he really, really wants to reform stuff, our her reformer decides to not let the practical be the enemy of the good, or something like that . . . . and sells out. In other words a lot of words for why they have to sell out.

    I’m not buying this crap. Please stop broadcasting this fake drama into my brain! I’m sick of these perps putting on their silly play.

    1. Walter Wit Man

      And that should be, “our HERO reformer . . . ”

      Speaking of heroes . . . anyone heard anything from Warren?

  13. different clue

    Either Scneiderman caved under pressure, or he was in on the plot from before the beginning. How are we to know?

    I prefer the in-on-the-plot theory. His actions have been too smoothly scripted to be real and his so-called “cave-ins” have been too perfectly timed and too lucratively convenient to the Obama gang-banker conspiracy to be mere cave ins.

    1. 3CPO

      I don’t think so. poor negotiators don’t ever get a good deal. Politics is all about balancing the good of the public with your own climb up the ladder.
      Even if he’s inside the party doesn’t mean he’s a go along to get along. He was probably visited by the bank cartel who told him we own this damned country and you just live here, and you’re still breathing because we allow it. The left is weak. We can’t expect Kucinch or Schneiderman to literally make martyrs of themselves and end their careers, if it’s down to that. Obama is a vindictive SOB. He did ask for OWS to keep up the pressure.

      The comment about Spitzer couldn’t be more wrong. he was illegally spied on, there’s no way he was doing a kabuki performance.

      A Theory of Power Relations

      Therefore all power requires sacrifices. First it is not easy and then on top of that others are competing for it. This is a truism of every field and profession. However in cases of power it requires sacrifices beyond the discipline and competition itself and having purely to do with manipulating the rules of competition. This is how we can define politics. Politics is politics not merely because it requires sacrifices to master a subject or sacrifices to win a competition but it requires sacrifices in order to manipulate the rules of the system. []

      When the provost or administrator begins shaping their decisions not according to the bureaucratic rules they must master but to advance or maintain themselves in a more favorable light compared to other competitors for reasons outside the strict technical criteria of competition then this becomes political.

      So what is the sacrifice in the political? It is freedom. The freedom to make choices about what is the best course to pursue. From this comes the maxim of ‘power is its own policy’. Those who tend to rise within a system or stay within it are those who over time are willing to make compromises away from the best course of action and toward that which advances their position within the system
      To understand why we have to refer to a previous historical case. It was the election of John F. Kennedy against Richard Nixon. Nixon lost a very close election and did not choose to contest it. Years later, eight years later in fact, he would return and win the Presidency and in fact go on to win a second term (though of course he resigned partway through the second term)….

      @Hugh- Do you want him to die today, or live to fight another day? @timotheus knows already that he isn’t just an opportunist and has fought for a long time to overturn drug laws. That’s worth something.

    2. R Foreman

      These people are being told that without a sweetheart bank deal the whole system will collapse. They might be correct, if you believe their goal is to eventually return us to some kind of long-term median debt/gdp levels. Remember, we never got the deflation that was demanded by market forces, so banks are still insolvent and carrying loads of non-performing loans at par on their books.

      The money to punish these banks actually does not exist, so it becomes a decision of who to wipe out, your favorite big bank or 50 million main-street schmucks? This is the follow-thru of the extend-and-pretend policy started in 2008.

      Grab all the houses back from those dead-beats, then somehow adjust wages upward so people can barely afford them again, get them back into debt-peonage so they’re more predictable and don’t riot and string up the politicians, and all the while keep the construction industry busy with odd-jobs (not building new homes). Oh yeah, take everybody’s mind off the subject with some military action in a brown-skinned country.

  14. different clue

    People who have had enough of these little bait-and-switch velcro-decoy roach motel dramas should perhaps get whatever revenge they can against Schneiderman for decades to come at every point of his public life. Deprive him of the ego-reward he still seeks in public political life. Force him to collect his payoff strictly as private sector money. And maybe spray some public shame and opprobrium the money so it doesn’t smell quite as good.

    1. Walter Wit Man

      I wish. If we had a left in this country that would happen.

      But instead most on the left will preface each statement with fake praise for Schneiderman, “I have to give Schneiderman props for at least pushing back . . . ” “He’s the only one in this administration that is trying to hold banks accountable, so that’s good . . . ” Etc.

      One sees this all the time at places like Daily Kos. They acknowledge politicians’ fake promises as a “good” thing before they criticize. Even Glenn Greenwald does it (Jesus! Now I’m doing it. What I really mean is screw that sellout Glenn Greenwald :)

      1. different clue

        If I had more time before I have to get back to work, I could craft a better reply.

        So in the few minutes remaining, all I can say is that I am about to do it too. And here’s how: maybe certain people like Glen Greenwald and Dennis Kucinich are doing the best they know under the psychological burden of legacy political beliefs. “Mustn’t hurt the left” as if there were still a left to be hurt by anything. “Mustn’t disrupt Democratic Party unity” as if the legacy Democratic Party of 40 years ago still exists outside the memory of old and soon-to-die legacy Democrats like John Dingell.

        New leadership will emerge among younger people growing up in a new cultural matrix context wherein it is merely taken for granted that the Shitocratic Party is a Wall Street- Obama front group, and the left are hopeless nostalgiasts, and so forth.

        Bitter old dissidents like Michael Hudson and Herman Daly
        and Catherine Austin Fitts and the list goes on and on and on will of course be studied and respected by that new leadership as it emerges.

        I suspect any resistance will be decades-long and will be based on cultural rejection and economic rebellion against the official politiconomicultural mainstream.

        1. Walter Wit Man

          I do get the sense the younger generation, the people coming of age in this era of austere fascism, are less susceptible to the old parlor tricks that have worked so well the last few decades.

          For instance, I bet you most people that watched the debates are Boomers and get their news from cable news or the nightly news. Most young people probably couldn’t stomach the propaganda.

          1. Nathanael

            People under the age of 30 don’t watch TV news, unless they’re in one of those benighted rural areas with no Internet.

  15. George

    The Founding Fathers thought that consolidate power == tyranny.

    Schneiderman was confronted with a lot of power consolidated in the executive. He caved, most others had already done so.

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