And tonight, I’m asking my Attorney General to create a special unit of federal prosecutors and leading state attorney 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.
Just prior to the speech, Sam Stein published this exclusive about that unit that struck me as a bombshell.
During his State of the Union address tonight, President Obama will announce the creation of a special unit to investigate misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis.
The office, part of a new Unit on Mortgage Origination and Securitization Abuses, will be chaired by Eric Schneiderman, the New York attorney general, according to a White House official.
The reason this is such a big deal is that there have once again been rumblings that the negotiations that have been underway for over a year now between 5 banks, 50 state attorney generals, and 5 federal departments might be about to finalize a deal. So lets remind ourselves what has been happening there.
First of all, those talks are about a civil case on a very specific aspect of the mortgage crisis: the bank's use of robo-signing as part of the foreclosure process. NY Attorney General Schneiderman became a prominent hero to the professional left when he criticized the talks to the point that he was kicked off the executive committee managing them by the leader Iowa Attorney General Tom Miller. As I wrote in the article linked above, Schneiderman's concerns were very specific:
The principle conflict seemed to be over whether the settlement being negotiated with the banks would grant them immunity beyond the issue of foreclosure fraud. Schneiderman wanted to maintain NY's ability to prosecute the banks for things like the practice of assigning and bundling mortgages into securities.
Notice what Stein reported as the name of this initiative Schneiderman will co-chair: "Unit on Mortgage Origination and Securitization Abuses." So what we have here is the possible conclusion of the settlement talks about robo-signing in the foreclosure process and the beginning of work on the investigation of the issues involved in mortgage origination fraud and any criminal activity involved in bundling them into securities. Given Schneiderman's passion and commitment to the later, it makes perfect sense for President Obama to ask him to co-chair that effort. It means the administration is serious about the matter.
At least that's the way you'd see this move if you weren't suffering from Obama Derangement Syndrome (ODS). If you are, then your head explodes (warning: bagger of fire link) a little trying to figure out how to spin this one.
That upsets the entire balance of power with respect to the settlement. If Schneiderman joins, it undermines the group of “Justice Democrat” AGs who were working on how to deal with investigations in the absence of a settlement...
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...
I’d really like to be wrong about this. But this just reads like a gambit, a fix, a charade.
AMAZING! So when President Obama does things you don't like, you criticize him. When he joins with one of your heroes to do what you've been wanting, he's corrupting your hero - who gets thrown under the bus as someone who would participate in a charade. Could there be a clearer example of ODS? I think not.
Update: From the LA Times:
Schneiderman said Wednesday that the new unit's efforts shouldn't affect the foreclosure settlement talks because those investigations deal with conduct that took place after the housing market collapsed.
"The multi-state talks all relate to post-crash conduct. These are abuses in the foreclosure process," he said. "Our working group is focusing on the conduct related to the pooling and creation of mortgage-backed securities...the conduct that created the crash, not the abuses that happened after the fact."
I don't think you can make it any more clear than that!