Obama Admin Pressuring NY AG Schneiderman to Drop Bank Investigations

We are getting leaks that the Obama administration is going full bore to prevent New York State Attorney General from doing a thorough and diligent investigation of the banksters mortgage fraud:

Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, according to people briefed on discussions about the deal.

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.

Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.

But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.

So, not only are they pressuring Schneiderman, but they are trying to gin up an AstroTurf response to further intimidate him.

I'm with what Yves Smith said, "It is high time to describe the Obama Administration by its proper name: corrupt." (emphasis mine)

What's more, he's also catching flack from the in the person of Kathryn Wylde, Deputy Chair of the New York Bank of the Federal Reserve, who accosted him at a memorial service

Representatives for the four big banks declined to comment. Mr. Schneiderman has also come under criticism for objecting to a settlement proposed by Bank of New York Mellon and Bank of America that would cover 530 mortgage-backed securities containing Countrywide Financial loans that investors say were mischaracterized when they were sold.

The deal would require Bank of America to pay $8.5 billion to investors holding the securities; the unpaid principal amount of the mortgages remaining in the pools totals $174 billion. Lawyers representing 22 institutional investors, including the Federal Reserve Bank of New York, BlackRock and Pimco, contended that the deal was favorable.

This month, Mr. Schneiderman sued to block that deal, which had been negotiated by Bank of New York Mellon as trustee for the holders of the securities. The lawsuit contends that the deal could “compromise investors’ claims in exchange for a payment representing a fraction of the losses” experienced by investors and that it had been negotiated without the knowledge of all of the holders of the securities.

The lawsuit angered Bank of New York Mellon, and as Mr. Schneiderman was leaving the memorial service last week for Hugh Carey, the former New York governor who died Aug. 7, an attendee said Mr. Schneiderman became embroiled in a contentious conversation with Kathryn S. Wylde, a member of the board of the Federal Reserve Bank of New York who represents the public. Ms. Wylde, who has criticized Mr. Schneiderman for bringing the lawsuit, is also chief executive of the Partnership for New York City. The New York Fed has supported the proposed $8.5 billion settlement.

Other investors in the Countrywide mortgage pools who were not part of the settlement talks between Bank of New York Mellon and Bank of America have called the terms inadequate.

Characterizing her conversation with Mr. Schneiderman that day as “not unpleasant,” Ms. Wylde said in an interview on Thursday that she had told the attorney general “it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

(emphasis mine)

Defrauding investors and home buyers is defensible?

I'm with Barry Ritholtz, who has called for Wylds's resignation:

If the Times report is accurate, and the quote below [it;s the last paragraph above quote] represents Ms. Wylde’s comments, than that position is a laughable mockery, and Ms. Wylde should resign effective immediately.

…………

But what is surprising is the utterly inappropriate behavior of Kathryn S. Wylde. She is not only a member of the board of the Federal Reserve Bank of New York, but occupies the seat supposedly reserved for the representing the public.

If the Times report is accurate, and the quote below represents Ms. Wylde’s comments, than that position is a laughable mockery, and Ms. Wylde should resign effective immediately.

(emphasis mine)

In any case, if you want to contact the AG and tell him not to back off, you can call (800) 771-7755 or at (212) 416-8000) or use his e-mail form.

This is particularly recommended.

BTW, if you live in Delaware, you might want to drop a dime on Beau Biden, the VP's son, and Delaware's AG, who has joined with Schneiderman in opposing the BoA deal.

If the Fed and the Obama administration are dead set on any sort of meaningful reform or accountability for the banks, then we need back up the State Attorneys General to pursue the banksters.

[on edit]

The AGs or Massachusetts and Nevada are also balking on the settlement offer, and considering that Nevada has probably the worst foreclosure problems in the nation, it makes any settlement even more problematic.