I'd really like to be enthusiastic about the announcement of a new federal investigatory task force looking at the foreclosure crisis.
New York Attorney General Eric Schneiderman, much like Elizabeth Warren, has done enough to show his commitment to holding Wall Street accountable for their crimes to show that his motives are good and his decisions should be trusted. Schneiderman was effectively the first statewide elected official to champion investigating foreclosure fraud, robosigning, and securities fraud in connection to the housing crisis. His leadership is largely responsible for forestalling any bad settlement outcome. That means something in my eyes and so I am willing to trust that he and his staff truly believe that the resources and power that come from working on a federal task force will allow him to do even more to hold banksters accountable for breaking the law.
All that said, there are real questions about what bringing Schneiderman into the fold will actually do. Will there be quick indictments of senior level bankers? Or will the composition of the task force prevent Schneiderman from leveraging power in a constructive way? Abigail Field was the first to note how weak the composition is, identifying major problems with Schneiderman's co-chair and beyond:
Schneiderman isn’t chairing anything. He’s Co-Chairing. That’s a huge difference. If he’s Chair he’s in charge. If he’s Co-Chair he needs consensus. And who is he Co-Chairing with? Four people, starting with Lanny Breuer. That’s unacceptable.David Dayen points out another complication relating to another member of the task force, Tony West, assistant attorney general in the DOJ's Civil Division: he's the brother-in-law of California AG Kamala Harris. Harris is currently sitting on the outside of the bank settlement talks and is the subject to a full-court press by the Obama administration to get back on board. Given that West has no real experience with financial fraud, it's hard to view his appointment to this task force as anything other than a cynical vehicle to put even greater pressure on Harris.
The reason we want Schneiderman in charge of prosecuting is because Breuer, who heads the Justice Department’s Criminal Division, hasn’t done his job. If he had pursued these prosecutions we’d have a lot more justice in this country right now than we do. Why has Breuer failed to go after the people who committed “misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis”? Is it because he’s an ex- (and likely future) Covington & Burling partner? Doesn’t matter. His track record speaks for itself. There is only one reason to have him co-chair with Schneiderman, and that’s to rein Schneiderman in.
Schneiderman’s also got to contend with Robert Khuzami, the SEC’s top law enforcer. Khuzami’s SEC can be called aggressive only when measured against Breuer’s Criminal Division. Having Khuzami on the committee gives the weak-enforcement lawyers two people to Schneiderman’s one. And Khuzami is deeply conflicted because he was Deutsche Bank’s CDO lawyer in 2006 and 2007, peak shadiness times.
There's a petition on Whitehouse.gov to get Breuer, Khuzami and West removed from the task force. For what it's worth, if the administration wanted to strengthen their commitment to this investigation even more, they would replace those three with people like Nevada AG Catherine Cortez Masto, former SIGTARP Neil Barofsky, or even a prosecutor like Patrick Fitzgerald. These are people who, like Schneiderman, have shown real commitments to investigation and accountability in their jobs.
The whole point of raising these concerns is to help set the table to enable Schneiderman to succeed. If this committee ends up being a paper tiger, its creation will have served to disempower one of the few advocates for real investigations and accountability out there.
David Dayen raises another important and problematic consequence of the President putting Schneiderman on this task force:
More important, this announcement has collapsed the unified wall of objection on the left to a settlement. And I mean COLLAPSED. Just a day ago, activists were getting in the face of their AGs, warning them of the dangers of a weak settlement that provides little in the way of relief to homeowners. Now I have dozens of press releases in my inbox from liberal groups offering huzzahs to the President for this wonderful investigatory panel.There is a real chance that Dayen is right. Of course, the best way to be proven wrong will be if this task force has teeth and starts producing indictments quickly. A good place to start, as Field notes, would be the 18 violations of the Servicemembers' Civil Relief Act which JP Morgan Chase admitted to in congressional testimony - each violation representing a wrongful foreclosure of a service member. These are criminal misdemeanors with up to a year in jail per offense which have never been prosecuted. It's a softball, but speedy indictments for these crimes would be a sign that the task force is going to, at long last, serious about investigating bankster criminality.
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Only this isn’t a victory at all, at least not yet. Schneiderman may be trying to work from within, but he’s saddled with a panel full of co-chairs tied to banks with a history of obstructing accountability. The united front of Justice Democrats has been nicked. Kamala Harris, facing enormous pressure to go along with the settlement (she remains opposed at this point), now must contend with being the main big-state holdout AND having a family member co-chairing the investigation panel!
This is a classic Obama move, putting a threat or a rival inside the tent. It happened with Elizabeth Warren and David Petraeus and Jon Huntsman, and it’s happening again. It divides the coalition against a weak settlement, which will at the least shut down state and federal prosecutions on foreclosure fraud and servicing issues. It puts hopes in yet another investigation, one with little chance for success.
