Ben White of Politico’s Morning Money reports that the chances of a deal with the five largest banks and all fifty state attorneys general on foreclosure fraud has been reduced, thanks to an ad by the Democratic National Committee which hits Mitt Romney on his comment suggesting the need to speed up foreclosures.

MORTGAGE SETTLEMENT HOPES DIMMING? – From a person close to the foreclosure abuse settlement talks: “The chances for a bipartisan settlement of the mortgage crisis at the state Attorney General level probably diminished on Monday following a series of partisan comments by Administration officials and this DNC advertisement [slamming Mitt Romney’s comments suggesting the housing market should be allowed to hit bottom.] …

The source told Morning Money: “Republican AGs would like to craft a bipartisan deal and have held their noses and stayed involved in the discussions so far even though the recommendations may include some ideas like principal reduction that they dislike. But they aren’t going to sign on to a deal that sets them up to be used as advertising fodder against the eventual Republican presidential nominee.”

For those keeping track, six attorneys general leaving the talks don’t really impact the chances of a settlement in the eyes of the press, but the DNC hitting Romney about speeding up foreclosures does. OK, then.

I’m sure Republican AGs, who have fought to reduce the size of the penalty banks pay while pushing for a total release of liability for the banks, would jump at an excuse to half-heartedly walk away, if only to make the deal weaker. But I don’t buy that these AGs will walk away from giving the banks a deal. The deal is a joke; it’s a huge bailout for institutions which would be insolvent if forced to confront their full liability under the law towards government, towards homeowners, and towards investors in mortgage backed securities. It’s simply not plausible that the Republicans will walk away from the table because the DNC put together a video attacking Mitt Romney.