The New York attorney general has requested information and documents in recent weeks from three major Wall Street banks about their mortgage securities operations during the credit boom, indicating the existence of a new investigation into practices that contributed to billions in mortgage losses.
Officials in Eric T. Schneiderman’s, office have also requested meetings with representatives from Bank of America, Goldman Sachs and Morgan Stanley, according to people briefed on the matter who were not authorized to speak publicly. The inquiry appears to be quite broad, with the attorney general’s requests for information covering many aspects of the banks’ loan pooling operations. They bundled thousands of home loans into securities that were then sold to investors such as pension funds, mutual funds and insurance companies.
This is good news. While it’s not clear if Schneiderman is pursuing criminal or civil charges, it’s a big step forward in terms of oversight. As New York’s Attorney General, Schneiderman is uniquely positioned to investigate Wall Street, something his predecessors Eliot Spitzer and Andrew Cuomo did repeatedly. Most important in the Morgenson article:
The requests for information by Mr. Schneiderman’s office also seem to confirm that the New York attorney general is operating independently of peers from other states who are negotiating a broad settlement with large banks over foreclosure practices.
By opening a new inquiry into bank practices, Mr. Schneiderman has indicated his unwillingness to accept one of the settlement’s terms proposed by financial institutions — that is, a broad agreement by regulators not to conduct additional investigations into the banks’ activities during the mortgage crisis. Mr. Schneiderman has said in recent weeks that signing such a release was unacceptable.
Any foreclosure settlement that takes place prior to an actual investigation into the banking industries foreclosure practices would a colossal miscarriage of justice. AGs have a duty to investigate what actually happened before trying to paper over it with a settlement. Hopefully other AGs are emboldened by Schneiderman’s investigation and start their own independent looks at what’s going on with foreclosure fraud.