President Obama also made a striking announcement, one that could have been written by the Occupy Wall Street General Assembly: “I’m asking my attorney general to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis. This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans.”
Remarkably, President Obama named New York Attorney General Eric Schneiderman as co-chairperson of the Unit on Mortgage Origination and Securitization Abuses. Schneiderman was on a team of state attorneys general negotiating a settlement with the nation’s five largest banks. He opposed the settlement as being too limited and offering overly generous immunity from future prosecution for financial fraud. For his outspoken consumer advocacy, he was kicked off the negotiating team. He withdrew his support of the settlement talks, along with several other key attorneys general, including California’s Kamala Harris, an Obama supporter, and Delaware’s Beau Biden, the vice president’s son.
In an op-ed penned last November, Schneiderman and Biden wrote, “We recognized early this year that, though many public officials—including state attorneys general, members of Congress and the Obama administration—have delved into aspects of the bubble and crash, we needed a more comprehensive investigation before the financial institutions at the heart of the crisis are granted broad releases from liability.”
When news of Schneiderman’s appointment surfaced, MoveOn.org sent an email to its members declaring: “Just weeks ago, this investigation wasn’t even on the table, and the big banks were pushing for a broad settlement that would have made it impossible. … This is truly a huge victory for the 99 percent movement.”
The stakes are very high for the public, and for President Obama. He relied heavily on Wall Street backers to fund his massive campaign war chest in 2008. Now, in this post-Citizens United era, with expected billion-dollar campaign budgets, Obama could find himself out of favor with Wall Street. For the public, as noted by the Center for Responsible Lending: “More than 20,000 new families face foreclosure each month, including a disproportionate percentage of African-American and Latino households. CRL research indicates that we are only about halfway through the crisis.”
Unanswered at this point is whether or not Schneiderman’s appointment signals his willingness to go along with the multistate settlement now said to be nearing completion. Details are not yet public, but the deal is said to involve a $25 billion payment from the largest banks as a settlement for charges surrounding problematic mortgage-loan practices like robo-signing documents and grossly inadequate loan servicing, making foreclosures more likely. Rolling Stone’s Matt Taibbi, who has been doing essential investigative reporting on the financial crisis, told me: “It doesn’t make sense for companies to settle without New York or California, since the potential liability from those two states alone could put them out of business, could cripple any of the too-big-to-fail banks.”
Obama is aware that those at the Occupy Wall Street protests around the country include many who were his most active supporters during the 2008 campaign. Does the formation of the new task force signify a move to more progressive policies, as MoveOn suggests?
Longtime consumer advocate and former presidential candidate Ralph Nader doesn’t hold much hope: “This financial crimes unit, that’s like putting another label on a few doors in the Justice Department without a real expansion in the budget.” Delaware’s Biden expressed similar concerns about the task force, asking: “How many FBI agents are being put on it? How many investigators? How many prosecutors?”
This is the Occupy Wall Street conflict distilled. Will Eric Schneiderman’s new job lead to the indictment of fraudulent financiers, or to just another indictment of our corrupt political system?
*Denis Moynihan contributed research to this column.*
