You’re Going to Hear a Lot About Eric Schneiderman

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He’s the guy who bucked the Obama administration on a nationwide investigation into foreclosure fraud and got booted from the executive committee of state attorneys general who are working to reach a settlement with banks. The disagreement between Schneiderman, New York’s AG, and Treasury Secretary Tim Geithner, HUD’s Shaun Donovan and Iowa Attorney General Tom Miller, the lead negotiator in settlement talks, boils down to scope and timing. Shahien Nasiripour explains:

State and federal officials have not agreed on the scope of banks’ release from liability that would accompany such a deal; negotiators continue to hammer out how much of the money pot will be split between restructuring borrowers’ mortgages and bank fines, and officials are not yet near an agreement on how the coalition of state and federal government agencies will monitor and enforce bank behavior in the wake of a settlement agreement.

The Obama administration wants these issued settled quickly and cleanly. Schneiderman, along with AGs from Massachusetts, Delaware and Nevada, don’t want to agree to anything that will give banks immunity from further prosecutions they might want to pursue later. Basically, Miller and the feds want to stick to mortgage servicers — the people foreclosing on homes without proper documentation — while Schneiderman et al. hope to go after securitizers — those who packaged sketchy loans during the financial crisis. The facts of the conflict aren’t so extraordinary, but it’s turned very political and very public.

After pressure from the administration failed to sway Schneiderman, Miller basically shut him out of negotiations on Tuesday. The press got wind and Schneiderman, emboldened, sent a note to his campaign e-mail list, essentially telegraphing that the speedy-resolutioniks could stuff it:

You might have been following the latest developments related to the national settlement of the mortgage probe, including this story in today’s Huffington Post about our tough fight for a comprehensive resolution to this crisis.

Let me tell you directly: I am deeply committed to pursuing a full investigation into the misconduct that led to the collapse of America’s housing market, and to seeking a resolution that gives homeowners meaningful relief, allows the housing market to begin to recover, and gets our economy moving again.

I don’t know if a servicer settlement would make Schneiderman’s other investigations impossible–that’s really the contested point here and I imagine it would, naturally, depend on the details of the settlement. But it’s worth noting that the players, state AGs, and issue at hand, prosecuting Wall Streeters, make for intoxicatingly potent politics. The position of attorney general has become something of a stepping stone to higher office in recent years. Martha Coakley (Massachusetts), Dick Blumenthal (Connecticut), Jerry Brown (California), Andrew Cuomo (New York), Henry McMaster (South Carolina) and Bill McCollum (Florida) ran big-time statewide campaigns in 2010. Beau Biden almost ran one in Delaware too. That’s not to say their efforts in office amounted to shallow politicking. Coakley, incidentally, was terrible at the politics but quite good at the crusading.

In blue New York, with the powerful financial fraud-busting Martin Act at their disposal, it is now the norm for attorneys general to become White Knights on Wall Street. Cuomo, and Eliot Spitzer before him, parlayed the role into successful gubernatorial bids and whispers of grand political promise. Prosecuting Wall Street remains a banner issue for the left. Schneiderman, now publicly jousting with the Obama administration, is going to get a lot of attention.

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