The conservative Washington Post editorial board has weighed in on the settlement talks between banks and fifty forty-six state attorneys general around robosigning. Oddly the WaPo blames New York Attorney General Eric Schneiderman for the foreclosure crisis, because he wants to investigate what is happening and prosecute any illegal actions by the banks. The WaPo ed board basically wants a quick settlement so they can move on with as little damage to banks as possible (undisclosed coincidence: Warren Buffett owns a big piece of the Washington Post, as well as Bank of America and Wells Fargo).

But beyond the usual dishonesty that goes along with any pro-banker screed around foreclosure and securitization fraud, the Post’s editorial board just makes up a few facts in their attack on Schneiderman:

The majority of the other attorneys general, led by Tom Miller of Iowa, have kicked Mr. Schneiderman out of the negotiations, accusing him of making excessive demands. Mr. Schneiderman protests that the banks are to blame, for trying to use the robo-signing case to get immunity they could use on the securities front. Mr. Miller and his colleagues respond that they have no intention of letting the banks off that particular hook.

First, Miller kicked Schneiderman off of the executive committee unilaterally. There was no vote of other AGs, at least according to, ahem, the Washington Post.

Second, and more importantly, Miller is offering the banks a release around securitization fraud. Shahien Nasiripour at the Financial Times reported on Monday night:

State prosecutors have proposed effectively releasing the companies from legal liability for allegedly wrongful securitisation practices, according to five people with direct knowledge of the discussions.

As we’ve seen before, when the banks send their allies out to attack Eric Schneiderman, there is little regard to the truth.

For those not paying close attention to this issue already, it may be news to you that despite being outed a year ago for using the practice of robosigning to fabricate thousands of documents used to foreclose on homeowners, banks are still using this practice today. American Banker:

Some of the largest mortgage servicers are still fabricating documents that should have been signed years ago and submitting them as evidence to foreclose on homeowners.

The practice continues nearly a year after the companies were caught cutting corners in the robo-signing scandal and about six months after the industry began negotiating a settlement with state attorneys general investigating loan-servicing abuses.

Several dozen documents reviewed by American Banker show that as recently as August some of the largest U.S. banks, including Bank of America Corp., Wells Fargo & Co., Ally Financial Inc., and OneWest Financial Inc., were essentially backdating paperwork necessary to support their right to foreclose.

Some of documents reviewed by American Banker included signatures by current bank employees claiming to represent lenders that no longer exist.

David Dayen explains what this means:

And you see, the banks HAVE to fabricate documents. Because they destroyed the private property system through improper and sloppy securitizations and lost or missing mortgage assignments during the bubble years, and as such they cannot prove standing to foreclose without lying. Robo-signing is a crime, but it’s also a cover-up for a much bigger crime, which involves MERS and improper mortgage transfer and securities fraud. The robo-signed, forged, fabricated documents are the smokescreen being used to foreclose and get the real problem off the books. Banks are trying to wriggle off the hook by saying they are merely “memorializing” past actions with the fake documents. Some courts aren’t buying it; the pooling and servicing agreements stipulate that all assignments showing transfers must take place within 60 days, not years later through “memorialized” actions.

What this really comes down to is that making a settlement with banks around robosigning now, while there has been no real investigation by the state law enforcement officials who are negotiating a settlement and while the practice is continuing as the negotiations go on, is dangerous and premature. The banks can’t possibly be negotiating in good faith with Tom Miller and the other state AGs because they’re still committing the crimes they want to be released from prosecution for!

There’s a massive criminal scheme being revealed by the press and a handful of diligent public officials like Attorneys General Eric Schneiderman, Catherine Cortez Masto and Beau Biden, as well as county Registers of Deeds like Jeff Thigpen in North Carolina and John O’Brien in Massachusetts. These officials seem committed to pursuing investigation and accountability. It’s time their peers get on board.

Originally posted at AMERICAblog

We are finally seeing righteous indignation is within the 50 state attorneys general settlement talks:

Another person close to the talks, who like several others spoke on the condition of anonymity to discuss the situation more freely, said many in the group are “just exasperated. . . . This smear campaign of lies and innuendo, it’s uncalled for, it’s unprecedented, and it threatens substantial consumer harm.”

If you think this referred to the smears being launched by Wall Street and the Obama administration at NY AG Eric Schneiderman, you’d probably agree with it. But you’d be wrong. Apparently the push by Schneiderman, Beau Biden, Catherine Cortez Masto and other allies for a deal which doesn’t shut down their ability to investigate foreclosure and securities fraud is hurting Iowa AG Tom Miller’s fee-fees.

“We’ve been accused of being in bed with the banks. To say that to a group of people who have spent the last seven to 10 years fighting mortgage abuses day in and day out is an insult of the highest order,” said Iowa Assistant Attorney General Patrick Madigan, a longtime Miller deputy, who has worked on major settlements with subprime lenders such as Countrywide and Ameriquest. “It’s just unreal.”

I guess Miller’s office has a real problem when the entire New York Democratic congressional delegation chides him for tossing Schneiderman out of the talk’s executive committee. Instead of responding to Jerrold Nadler et alia, Miller is running to the press to complain about his unilateral, pro-bank actions coming under scrutiny.

The reason Miller is being accused of being in bed with banks is because that’s what you call it when you raise more than $250,000 from the finance industry right after announcing that you’re leading a 50 state investigation into that same industry. It happens when you then shift from guaranteeing to “put people in jail,” to producing a settlement term sheet before you even sat down to negotiate with the banks. It happens when you kick the individual who has done more to ensure that there is actually investigation before a settlement off the executive committee for having the temerity to try to get the best deal possible. If Tom Miller’s office doesn’t like being accused of being in bed with banks, he should get out of the bed and start investigating the banks.

Originally posted at AMERICAblog

Yesterday Iowa Attorney General Tom Miller, who is in charge of the 50 state settlement negotiations between banks, the administration and all 50 state attorneys general summarily kicked New York AG Eric Schneiderman off of the Executive Committee, which had been steering the negotiations.

Schneiderman, who doesn’t want a settlement to bar further investigations of mortgage practices by individual states, 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.

We will see if Miller removes Delaware’s Beau Biden, who’s right there with Schneiderman pushing for real investigations and a narrow settlement, or Illinois’ Lisa Madigan, who has also cast doubt on the scope of settlement being too broad. David Dayen has a strong response from Iowa Citizens for Community Improvement:

“Miller threw Schneiderman under the bus and as a result we’re likely to see a significantly weaker settlement,” said CCI member Judy Lonning from Des Moines. “We’re extremely disappointed. Tom has really let us down.”

“Scheiderman was the first AG to say that he wasn’t going to back down on the big banks, and he was the first AG kicked out of the investigation,” Lonning said, “There’s no question who this decision favors. It’s all about making life better for the big banks, and we expected Tom Miller to do better than this.”

Harsh words for Miller, coming from a group that has fought hard to make sure the settlement looks out for struggling homeowners who have suffered abuse at the hands of greedy banks.

The real question is, can this group under Miller get a settlement at all? Or will the hard lines being drawn by Schneiderman and a handful of others make the process moot?

Matt Taibbi of Rolling Stone has an explosive look at how the SEC has been routinely destroying evidence of financial crimes by Wall Street.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency’s records – “including case files relating to preliminary investigations” – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term “Orwellian,” devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or “Matters Under Inquiry” – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission’s internal website. “After you have closed a MUI that has not become an investigation,” the site advised staffers, “you should dispose of any documents obtained in connection with the MUI.”Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The SEC hasn’t just done this a handful of times, Taibbi finds that over 18,000 separate MUIs were destroyed.

The Taibbi piece also provides an in-depth look at the revolving door between the SEC and top Wall Street banks and law firms. To make matters worse, the biggest participants in the revolving door come from the SEC’s Enforcement Division – the people whose day to day job is investigating Wall Street and stopping criminal behavior.

The whole story is absolutely a must-read. But here’s where this gets really important for the average American:

Forget about what might have been if the SEC had followed up in earnest on all of those lost MUIs. What if even a handful of them had turned into real cases? How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002? Might the need for taxpayer bailouts have been lessened had fraud cases against Citigroup and Bank of America been pursued in 2005 and 2007? And would the U.S. government have doubled down on its bailout of AIG if it had known that some of the firm’s executives were suspected of insider trading in September 2008?

Taibbi points out that the answers to these questions are essentially unknowable. But there’s no doubt that the information that the SEC destroyed was important. Hell, there’s no doubt that the failure of a regulatory agency to actually investigate and conduct oversight of the industry it is tasked to oversee is a huge problem. The story of the financial collapse is largely a story of the ignorance of regulators, risk management officers and bank executives. Much of this ignorance was deliberate. Refusing to investigate complaints of bad behavior is a pretty clear example of how this willful ignorance was maintained.

Taibbi’s piece discusses how Senator Chuck Grassley’s office has attempted to get answers from the SEC about the destruction of MUIs. Not shockingly, the SEC has basically told him to bugger off. Hopefully a curmudgeon like Grassley will get pissed off enough about the SEC’s disrespect of his office to do something. Clearly there need to be meaningful congressional investigations into the SEC’s destruction of evidence in contravention to the law. In the mean time, I’d hope that Taibbi’s piece opens the eyes of administration officials to the massive problems at the SEC. This behavior cannot be allowed to continue if there’s any hope to rebuilding the US economy in a way that doesn’t put it at the perpetual mercy of banksters deciding to break the law to line their pockets.

Originally posted at AMERICAblog.

Of all the state attorneys general in America, New York’s Eric Schneiderman has been most active in pursuing investigations of the foreclosure crisis and potentially illegal activities that have infected the housing sector.  As a result, it’s not shocking that there now seems to be a concerted effort to smear Eric Schneiderman by Wall Street banks and their lackeys.

While investigating foreclosure fraud in New York, Schneiderman also has jurisdiction to look at fraudulent securitizations and settlements in this area, as we’ve seen with his action around the Bank of America/Countrywide settlement with Bank of New York Mellon. Schneiderman has also been vocal in his skepticism of the progress of the 50 state settlement talks being pursued by Iowa AG Tom Miller, the administration and major Wall Street banks. His opposition to a deal could result in it being scuttled and this scares the crap out of the banks.

First, via David Dayen, we saw Bank of New York trot out Katheryn Wylde, a member of the board of the NY Fed and president of Partnership for New York City, to the press to bash Schneiderman’s questioning of the merits of the BoA/BoNY settlement. Here’s the hit:

A BNY Mellon spokesman told me the bank didn’t want to comment on the broader implications of the AG’s filing, but directed me to Kathryn Wylde, CEO of the Partnership for New York City, a business development non-profit. She said that the AG’s “careless action” hurts New York’s standing as a financial center.

“It’s disappointing from the standpoint of the business community that the AG would make a fraud accusation against a major financial institution — in the press,” she told me. “And to not have any consultation with the institution? The bank was blindsided by what appears to be an outrageous charge.” (The AG’s press office didn’t respond to my request of comment.)

Dayen points out:

So you have a board member for an federal overseer of banks on Wall Street (Wylde claims that the NY Fed “serves no regulatory function,” which is just absolutely not true) attacking a state regulator for stepping into a settlement where he has found massive fraud in a preliminary investigation. She’s taking up for BNYM, which the NY Fed oversees, against the state Attorney General. This is just a classic case of regulatory capture.

There’s almost no way this is not coordinated. Wylde is pretty powerful in New York circles, I understand, and she’s raising fears of a slowdown to New York City’s main economic engine to stall regulatory oversight. The banks must continue looting, the story goes, or they’ll stop creating jobs in Manhattan.

Yves Smith of Naked Capitalism also weighs in against the attack from BoNY and Wylde:

“Fraud accusation…in the press”? This woman evidently has reading comprehension problems. If she had bothered to go through any of the news reports on the motion, the charges were not made in “the press”, they were made via a court filing.
…
And no, Bank of New York was not entitled to “consultation” when it is about to be accused of fraud, particular when the facts and law are as clear as they are in this instance. Her argument indicates either abject ignorance or deliberate deceit.

Ouch. That’s really embarrassing for Wylde. And again, this is a person who sits on the board of the New York Federal Reserve.

But this isn’t the only smear that’s being trotted out to undermine Eric Schneiderman’s investigation and pursuit of accountability on Wall Street. The New York Daily News has a story attacking Schneiderman for doing entirely legal and proper fundraising to pay off campaign debts – specifically a loan that he made to his campaign. There’s nothing at all illegal about him fundraising to pay a campaign debt, but clearly someone is pushing a story to impugn Schneiderman’s character.

Wall Street has a history of going after any attorney general who takes a serious interest in making banksters follow the law. The stakes here are incredibly high – Schneiderman’s investigations into robosigning and foreclosure fraud have the potential to cost banks tens if not hundreds of billions of dollars. That makes Schneiderman a high priority target and we’re seeing that targeting happen now. Schneiderman is doing critically important work that has the potential to hold lawless banksters accountable, to help keep homeowners in their homes, and to ensure that the rule of law – the foundation of our country – is maintained in the face of attempts by wealthy elites to twist it for their personal benefit. Anyone who cares about the outcome of his investigations should join together in identifying and opposing the smears, as Dayen and Smith have with Wylde and hopefully others will with the Daily News smear.

Originally posted at AMERICAblog

Gretchen Morgenson reports:

The New York attorney general is moving to block a proposed $8.5 billion settlement struck in June by Bank of New York Mellon and Bank of America over troubled loan pools issued by Countrywide. A lawsuit filed late Thursday accuses Bank of New York of fraud in its role as trustee overseeing the pools for investors.In papers filed in New York State Supreme Court, lawyers for Eric T. Schneiderman, the attorney general, contended that Bank of New York misled investors about its conduct as overseer of the securities. The bank also breached its duties to investors by agreeing to the deal with Bank of America, according to the complaint, because the trustee is conflicted and “stands to receive direct financial benefits” as a result of the agreement.

Questioning the fairness of the deal, the attorney general’s lawsuit said that it could “compromise investors’ claims in exchange for a payment representing a fraction of the losses” that have been suffered by investors.

David Dayen highlights some key takeaways:

This is a major allegation. Schneiderman is saying that the game-playing with securitizations, which has been well-documented, represent violations of securities law on the part of the trustee and the originator of the loans. They knowingly sold junk to investors and violated their own agreements. And now they’re trying to whitewash it through a settlement where the bank and the trustee are colluding with one another. As Schneiderman says, “the Trustee stands to receive direct financial benefits under the Proposed Settlement.”And here’s the real bombshell: Schneiderman alleges that Bank of New York Mellon was aware that Countrywide failed to transfer loans properly to the trust. This means they sold what amounted to non-mortgage backed securities to investors, who should then be granted the full value of these bonds back. The pooling and servicing agreements governing the loan transfers are very precise, and were violated in this case, according to the AG.

We’ll see how this plays out in the courts, but it’s clear that Eric Schneiderman is one of the few real cops on the beat policing Wall Street. His actions here could have serious consequences to the ongoing 50 state attorneys general negotiations being lead by Iowa AG Tom Miller, who has sought to immunize banks from the consequences of robosigning and foreclosure fraud in exchange for a small cash settlemen. While the Miller negotiations have sought to move past this lawlessness (look forward, not back!), Schneiderman’s actions demonstrate the impossibility of a global settlement being anything but a disservice to homeowners, investors, and the American public. There needs to be more investigation and real accountability. Schneiderman’s intervention in the Bank of New York/Bank of America settlement is a strong start.

Yves Smith at Naked Capitalism has more about what Schneiderman is doing and what the consequences of his actions should be.