The state of California is pulling out of multi-state negotiations with large U.S. banks to resolve allegations of mortgage abuses, according to a letter obtained by Reuters, dealing a sharp blow to long-running efforts to secure a broad settlement.
California Attorney General Kamala Harris wrote in a letter on Friday that she will pursue her own investigation.
"California was being asked for a broader release of claims than we can accept and... the relief contemplated would allow too few California homeowners to stay in their homes," Harris said in a letter to government officials leading the talks.
New York exited the talks in August over a disagreement about how much legal immunity the banks should receive in any settlement.
Excerpt from a recent story on the settlement talks from Politico.
“Most of the American people do not feel there has been a full airing out of these issues, and they do not like the fact that people who caused these problems have not been held accountable,” Schneiderman said.
Schneiderman’s move may torpedo a carefully-negotiated $20 billion settlement, and state and bank officials met in Washington Friday for last-minute talks to salvage the deal. It has infuriated Wall Street and many of his fellow attorneys-general, who see him as an irresponsible, dishonest grand stander.
that settlement may be Democrats’ last chance to go after the big banks they see as the root of the trouble with the U.S. economy. It’s also symbolic of the very different approaches from the White House and its allies and the renegade progressives, led by Schneiderman.
The AGs’ inquiry stems from cases involving the illegal “robo-signing” of foreclosure documents that bank employees are required to review and was broadened to include the sprawling mess of loan servicing and foreclosure. In August correspondence, Iowa Attorney General Tom Miller, a close Obama ally who is leading the suit, was in talks for a $20 billion settlement in exchange for releasing the banks from some civil liability.
In Miller’s view, he is trying to to get relief for homeowners, while hewing to an Obama-esque vital center. This spring, he faced challenges from Republican attorneys general who objected to the idea that the government would pressure banks to reduce the debt of borrowers who had gotten themselves in over their heads. Now, he’s facing a revolt from Schneiderman, Delaware’s Beau Biden, and other attorneys general who would like to use the case for a more ambitious effort to restructure the American financial sector.
“These negotiations and issues are sort of a metaphor for what’s facing policy makers, in Washington and around the country,” Miller said, casting Schneiderman as a partisan bomb-thrower. “Can a bipartisan group of public officials form an agreement that furthers the public interest – but that’s not totally one-sided or the other and that has some elements of compromise in it? Or can something like this usually or always be destroyed by the left or the right?”
There are sharp disputes over theory and facts in the bank settlement talks, and the reality can be hard to tease out from unreleased letters between the banks and the states and off-the-record, talks. As Schneiderman tells it, he became alarmed soon after taking office at what he saw as a failure do demand more internal bank documents, and at suggestions that the banks would be able to settle not just narrow issues around the handling of foreclosures, but broad questions about the securitization of sub-prime loans that underlay the 2008 crisis.
“I was concerned about the scope of the investigation that had been conducted, and I was concerned about what kind of release the banks wanted,” he said. “I wasn’t going to release claims that hadn’t been investigated.”
Miller says the AGs and federal agencies have copious files on the housing crisis, and bridled in particular at Schneiderman’s claim that the settlement could ever have included a release from claims involving securitization or other broad issues.
“He’s essentially made that up,” he said of Schneiderman. “The release will center on robosigning and servicing and issues that are closely related to servicing. It’s not going to be a broad release.”
A private-sector figure closely involved in the talks between the Attorneys General and the banks, though, said the situation has not always been that simple. Miller and the other AGs, he said, were initially “thinking they were doing rough justice: Robo-signing was worth $5 billion. They’d take $15 billion on top plus some pretty progressive reforms, and then you get the market started again.”
“Either the dollar figure goes down or the release is fairly broad,” the person said. “The banks aren’t paying $20 billion for robo-signing.”
Miller says the servicing and foreclosure issues can raise the value of the settlement without preventing Schneiderman or other AGs from investigating the many other aspects of the crisis – issues that, he notes, are already the subject of extensive private securities litigation.
And he casts the settlement as a matter of urgency, one that appears to be shared by his allies in the Obama administration, though spokespeople for the Treasury and the Justice Departments declined to comment on the talks.
“Homeowners are in a very difficult situation right now,” Miller said. If the AGs, as Schneiderman and others have suggested, attach their cases to the lawsuits over securitization, the settlement could be delayed years.
“That’s not a good tradeoff, I don’t think,” he said.
Schneiderman argues that a deeper investigation would give the AGs more leverage for a more sweeping settlement, and that this is the last, best chance to get at issues at the heart of the troubled American economy.
“I think a more creative, robust settlement would be a good thing for this economy, and I think a thorough investigation that airs this out is critical for restoring public confidence,” he said.
Schneiderman doesn’t appear likely to back down, and he has deeply unsettled the fragile coalition of attorneys general, with several others joining him to press – demagogically, in Miller’s view – for a narrow release. Spitzer – who regularly calls to advise Schneiderman to follow an activist path – praised him to POLITICO for “continuing the notion that the New York Attorney General is the most effective outspoken voice in an environment where the federal regulatory agencies still haven’t flexed their muscles in a meaningful way.”
It’s a project that’s also won Schneiderman growing acclaim on the left.
“Holding the big banks accountable isn’t easy or popular inside the Beltway, but it’s necessary, and Attorney General Schneiderman is one of the leaders,” Feingold said in an emailed statement.
And the Attorney General sees it as part of a long, broad push.
“We didn’t get into this situation where the far right took control of the terms of the debate in America overnight. And we’re not gonna get out of it overnight,” he said before sending a visiting reporter to the door with a copy of the book he hands visitors, a biography of the civil rights strategist and pioneer Charles Hamilton Houston. “If you take more of a long-term perspective, I think the American people have the same desire for justice, and for us to resume our progression toward greater justice and greater equality with each generation.”
Wells Fargo accused of forging loan documents
A Las Vegas attorney who represents people facing foreclosure has accused Wells Fargo of forging loan documents. The allegation is the latest sign that efforts to hold mortgage lenders accountable are escalating in Nevada.