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Miller Boots NY AG Schneiderman Off Foreclosure Fraud Settlement Committee

The way the 50 state AG “investigation” of the bank foreclosure/securitization fraud saga has worked is that there’s a smaller task force of I believe 13 AGs and two banking regulators who are involved in the negotiations with the banks and whatever else it is that they’re working on. It turns out that New York’s Eric Schneiderman was part of that executive committee. At least until yesterday.

Schneiderman, who doesn’t want a settlement to block state investigations, was removed from the executive committee of state officials working on the deal, Iowa Attorney General Tom Miller said yesterday in a statement.

“New York has actively worked to undermine the very same multistate group that it had spent the previous nine months working very closely with,” said Miller, who is leading the state group. For a member of the executive committee, that “simply doesn’t make sense, is unprecedented and is unacceptable,” Miller said.

So I assume that Miller will soon throw Delaware’s Beau Biden, who has voiced the same concerns about a full liability release, who said yesterday that Schneiderman has raised “important and legitimate concerns about the scope of the releases sought by the banks,” off the executive committee? Will executive committee member Lisa Madigan of Illinois, who told the Wall Street Journal that “the release should be narrowly drafted” to only cover robo-signing and that “we are not releasing fair-lending claims,” be shown the door as well? Will everyone on the task force who has had difficulty agreeing to a total whitewash of the foreclosure fraud issues get booted? If so, the banks are going to have a sweet settlement with the state of Iowa. Probably nobody else, but still, Iowa.

Miller did not even speak with Schneiderman before kicking him off the committee, which just shows you the pettiness of this whole thing, as well as showing how doomed it is. The banks need New York in the deal; they’re too exposed to litigation on their securitization practices without New York.  It would be folly for them to sign a settlement without New York involved. And they know it.

If the settlement isn’t actually broad enough to cover securitization, if as Madigan and others say it’s narrowly tailored to cover robo-signing, then why haven’t the banks agreed to it? Why has there been a six-month delay in the negotiations? If New York was “intimately involved” in the settlement, how did it get a wrong impression that it would be a whitewash?

The Albany Times-Union has become the second major paper in Schneiderman’s home state to back him up on his resistance to a settlement. Tom Miller can play all the games he wants. But Miller has revealed himself as more concerned with the interests of the banks than of the people. And Schneiderman isn’t going down that road.

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David Dayen

David Dayen