Schneiderman vs. Robama: Immunity Deal Draws Nigh by Gus Wynn
In a three-author article, the Wall Street Journal was abuzz over the impending settlement which will grant immunity for innumerable counts of alleged robo-signing in exchange for loan "haircuts". Quoting HUD Secretary Shaun Donovan, the Journal glowingly touts the deal as the largest principal reduction of the crisis, promising a million borrowers a share of some $19 billion in relief on their loans:
"As part of the proposed settlement, Mr. Donovan said, a "number of families" who were harmed by foreclosure-processing mistakes would be directly compensated by banks."
The banks would also agree to reforms, as part of the practice of "deferred prosecution" that Obama has continued from the Bush era. Back-room wrangling between Wall Street giants and the SEC or DOJ have shown great tolerance of the reckless behavior that drove the US economy into the ditch.
With banks paying fines that represent small portions of their annual profit totals, the settlements have been considered a nicely manageable cost of doing business. But with a preponderance of industry flacks winding up regulating themselves, public outrage hit new highs this fall.
Finally, we saw NY District Court judge Jed Rakoff change course, infuriated that courts and federal agencies have simply stopped bothering to determine whether or not crimes were committed as they approved a profusion of immunity deals. As a result, Citigroup was instructed to prove their innocence in court risking a lutitude of investor lawsuits should they lose.
Is Anybody Here Sane?
NY Attorney General Eric Schneiderman has been leading the charge to conduct thorough investigations before negotiating away the people's right to prosecute. Since last August he has opposed Obama's proposed settlement with Citigroup, Bank of America, JPMorgan Chase, Wells Fargo and Ally Financial for robo-signing, an unauthorized practice that had become so common, authorities stopped caring.
The Revolving Door at Holder's DOJ
As it happens, four of the five banks involved in the settlement were clients of the DC law firm where both Attorney General Eric Holder and Lanny Breuer, the current head of the DOJ's criminal division, were partners. Reuters and Huffington Post report here that Holder opposed investigations into robosigning despite receiving ample evidence of forged or suspect documents going back to 2010, the same year deputies under both Holder and Breuer went back to work for to the same law firm.
Brokered by a 50-state panel of Attorneys General, the robosigning settlement talks ground to a halt when Schneiderman objected to the immunity provisions, seeking to preserve NY's rights to criminally prosecute, but also trying to tie together loan origination and securitization fraud allegations onto the same inquiry.
Upholding the rule of law is our best weapon in preventing future economic catastrophe, strongly dissuading criminal or reckless activity, seeking full reparations for victims instead of partial reimbursements and policing an industry plagued by government-industry incest and pay-for-play at the highest levels.
For taking his job seriously, NY's Eric Schneiderman was booted from the panel, but was later joined by AGs from five other states, most of whom have filed related lawsuits: Kamala Harris (CA), Martha Coakley (MA), Catherine Cortez Masto (NV), Jack Conway (KY) and Beau Biden (DE).
These rogue AGs met January 10, to share notes with some nine other AGs said to be upset with the slow pace of the federal negotiations and the tin ear of the Obama administration. Attending were representatives from NH, HI, MO, MI, MD, MN, OR and MT. Biden's Deputy AG Ian McConnel suggested the "50 state" AG panel was not truly representing the concerns of all the Attorneys General being asked to sign off on the deal. Follow up meetings were also in the planning, according to Huffington Post coverage.
It's possible news of an impending settlement came down because the administration felt Schneiderman, Harris and the rogue AGs were leading a growing exodus of other AGs. The stepped-up timetable may be forcing dozens of AGs to hurriedly pick sides in a showdown.
AM radio reports in NYC today suggested New York might 'lose it's share of the pie' because Schneiderman was not onboard. The WSJ spin is palpable, laughably describing the development as a "settlement of an investigation" although no investigation actually has taken place (can you 'settle' an investigation?). The WSJ would have New Yorkers believe we are lucky that the banks are offering back a fraction of the money taken through deceptive practice.
From a law and order perspective, Obama's settlement deal is horrid but it also just looks bad - the Obama administration clearly has favored banks from the outset - and seeks from them the corporate campaign donations that are expected to shatter records this fall.
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