The Schneiderman Gambit: Financial Fraud Unit Appears Designed to Fail, and Grease Skids for Foreclosure Fraud Settlement
By: David Dayen
I’ll pepper in my thoughts on the State of the Union Address throughout the day, but I would be remiss if I didn’t start with the announcement of a Unit on Mortgage Origination and Securitization Abuses (UMOSA) to investigate bank practices during the financial crisis. The unit will be co-chaired by Eric Schneiderman, the New York Attorney General who bravely waged an often lonely battle to stop a misguided settlement on foreclosure fraud. But “co-chair” is the operative word here, and it suggests that the entire maneuver was created to grease the wheels for the pre-arranged settlement, while turning this investigatory arm into nothing so much as regulatory theater.
This is the key part of Sam Stein’s story breaking the news:
The unit will not supersede the efforts already underway by the Department of Justice. Instead, it will operate as part of the president’s Financial Fraud Enforcement Task Force. In addition to Schneiderman, the unit will be co-chaired by Lanny Breuer, assistant attorney general at the Criminal Division of the Department of Justice, Robert Khuzami, director of enforcement at the SEC; John Walsh, a U.S. attorney in Colorado, and Tony West, assistant attorney general in the Civil Division at DOJ.
First of all, this becomes part of a three year-old Financial Fraud Task Force which has done approximately nothing on Wall Street accountability outside of a few insider trading arrests. So that’s the context of this investigative panel, part of the same entity that has spun its wheels. Second, the panel would only look at origination, where there have been plenty of lawsuits and where the main offenders are all out of business, and securitization, which may aid investors (that includes pension funds, of course) but not necessarily homeowners. Third, let’s look at the participants on this 5-member panel, which sounds to me like the absolute worst way to handle an investigation (you put an independent prosecutor in charge with a budget and subpoena authority if you really want to get something done, not a committee).
Be sure to check out the rest of this here…
David closes his post with…
I’d really like to be wrong about this. But this just reads like a gambit, a fix, a charade.
I hope he is wrong too…