The leftish blogosphere has been alight this week with heady hosannas of triumph over the appointment of New York State Attorney General Eric Schneiderman to head a new federal Unit on Mortgage Origination and Securitization Abuses to investigate the nefarious doings of the big banks. Schneiderman was state senator for my district for 20 years and should be ascended directly into heaven for his work in dismantling the horrible Rockefeller drug laws in our state. I always liked him and actually contributed money to his tough campaign for A-G, in which he was not the darling of the party establishment.
He also has taken a strong lead in pushing for real investigations of bankster misdeeds in the housing arena and has kept admirably distant from the scandalously phony ’50-state’ A-G settlement led by bankster front man Tom Miller of Iowa. Schneiderman, Biden of Delaware, Masto of Nevada, Harris of California and several others have bolted from this charade designed to give the guilty banks legal cover while Obama and Geithner have lent Miller substantial political support. So did Obama suddenly see the light? Or did the Occupy movement’s impact on the national debate require a better PR response?
I hope Schneiderman succeeds in carrying out investigations of the banks and holding their criminal feet to the fires of hell. But there are plenty of reasons to suspect that this appointment is a head-fake and that its ultimate aim is the opposite of what Obama trumpeted in the SOTU speech. If so, Schneiderman is a turncoat.
First of all, we need to ask why this federal unit needs to be created at all. It sounds good and has obviously persuaded many people that Obama is finally going to go after banking crimes, which have been detailed on the finance blogs in excruciating and appalling detail. But there are plenty of federal agencies, including the Department of Justice itself, with the subpoena power and resources to undertake this sort of investigation, none of which have been encouraged to do so by one Barack Obama. If the president has had a major change of heart, why not get his current employees to do their jobs instead of creating another level of bureaucracy?
A parallel question is why not encourage or strengthen current and ongoing state A-G efforts to pursue their local investigations and bring solid civil and criminal cases against the originators, servicers and other white-collar gangsters who continue to undermine the mortgage market? The hold-outs named above have been doing exactly that with the scant resources at their disposal. Or why not at least redirect Miller to stop negotiating a Get Out of Jail Free Card for the banks while the investigations that we supposedly need—and Miller steadfastly has refused to carry out—are undertaken?
One possible answer is that Obama doesn’t really want tough investigations and prosecutions at all but realized he needed to neutralize the independent state A-Gs who can bring charges and do serious damage to the banks. New York is the key state in all this given that many of the legalized theft vehicles a.k.a. securitization trusts, that were formed to package the lousy mortgages that blew up our economy, were headquartered in our state and are thus subject to its laws. Therefore, Schneiderman held very powerful cards, which he may now be handing over to the White House.
It’s pretty clear what the White House is getting out of this: Obama looks like he’s finally getting it vis-à-vis the banks just as campaign season gets underway. He re-convinces his disgruntled followers that he is out for the little guy after all. But what does Schneiderman get, other than national exposure and a shot at the eternal gratitude of the Wall Street-dependent Democratic Party?
There are many more unanswered questions in this surprise appointment: did Schneiderman’s fellow A-G holdouts know that he was going to take this gig? Did they agree to it? Were there negotiations among them to sketch the terms of the new entity and guarantee Schneiderman’s independence from the sorts of bureaucratic obstacles thrown by the White House at Elizabeth Warren, whom Obama famously tossed under the corporate bus to the delight of the big banks? A-G Biden of Delaware (son of the Veep) sounded a little sour about the deal, which suggests that he was blindsided by it.
In short, the whole thing pretty much stinks, and while one should not attribute motive nor presume in advance that it will fail, the chances that this is a sincere attempt to serve the public interest and prosecute bank fraud are slim. Obama is in the middle of a political campaign and needs the deep pockets of exactly the people who would be facing perp walks and huge, costly settlements if the new federal unit’s investigations actually succeed. How likely is it that this is Obama’s true intention?
Perhaps I will turn out to be wrong, but this gambit does not pass the whiff test: it is more likely to be a masterful political stroke by a president who is extraordinarily clever at looking like the reasonable, empathetic guy on the side of the downtrodden while doing the bidding of the powerful. And the ongoing clown show on the GOP side gives him precisely the cover he needs to make populist noises while doing nothing.