CREDO has become the first national progressive group, to my knowledge, to back New York Attorney General Eric Schneiderman as he attempts to hold a full investigation into fraud in the securitization processes by the mortgage industry.

In an email to supporters going out today (and copied below), CREDO asks them to sign a petition that says “I support Eric Schneiderman and the state attorneys general like him who are fighting to hold banks accountable for criminal activity. Stop trying to force them to accept a broad settlement that lets unscrupulous banks off the hook.”

The Obama Administration has been pressuring Schneiderman to accept a broad settlement with top banks on foreclosure-related issues. This week, Iowa Attorney General Tom Miller kicked Schneiderman off of the executive committee that has been negotiating the settlement with the banks.

CREDO rightly points out that the robo-signing scandal which was the main impetus for the 50 state AG investigation was really just a symptom of fraud, as well as fraud itself. The real problem for the banking industry is that they committed major errors when securitizing loans, improperly creating mortgage backed securities and confusing the chain of title on millions of homes. To date, no comprehensive investigation has been undertaken to determine the scope of this problem, so that a proper punishment for breaking the private property system of the country can be meted out, in both a criminal and civil capacity.

CREDO writes:

As the Attorney General of New York, Eric Schneiderman has a unique opportunity and a unique obligation to stand up for the victims of unscrupulous Wall Street firms. And the Obama administration and federal regulators should stop trying to strong-arm him [...]

Through congressional hearings and investigative reporting, we know of numerous stories of big financial firms engaging in shady mortgage practices, many of which seem on their face to violate various laws and regulations [...]

If we cave on the settlement, we send the message to giant financial firms that it’s okay to rip off millions of people and make obscene amounts of money doing so. Civil penalties will simply be part of the cost doing business, the law be damned.

The foreclosure fraud scandal has been something of a backwater, relegated to the business pages and not really in the forefront of the progressive critique of government policy. But with the housing market a lead weight on our economy, and the due process of homeowners and the rule of law itself hanging in the balance, it’s good to see a progressive group like CREDO working to make this a real national issue. It certainly is important enough to merit consideration.

The full letter is below.

Dear Friend,

The notorious robo-signing scandal is just the tip of the iceberg when it comes to wrongdoing by the mortgage industry. And New York Attorney General Eric Schneiderman is one of a handful of state attorneys general standing up to make sure the Wall Street crooks who illegally cheated millions of people don’t get a free pass.

But the Obama administration and federal banking regulators are pressuring Attorney General Schneiderman to back down and accept a settlement with the major mortgage firms that would impose no criminal penalties for breaking the law.

As the Attorney General of New York, Eric Schneiderman has a unique opportunity and a unique obligation to stand up for the victims of unscrupulous Wall Street firms. And the Obama administration and federal regulators should stop trying to strong-arm him.

Tell the Obama administration and federal banking regulators that you stand with Attorney General Eric Schneiderman and attorneys general like him who are fighting to hold banks accountable for criminal activity.

Through congressional hearings and investigative reporting, we know of numerous stories of big financial firms engaging in shady mortgage practices, many of which seem on their face to violate various laws and regulations.

Yet the New York Times reported that Shaun Donovan, the secretary of Housing and Urban Development, and various officials in the Department of Justice are pressuring Attorney General Schneiderman to accept a settlement before any significant investigation into these violations take place.

And what’s particularly galling is that the proposed settlement amounts to little more than a slap on the wrist to the people who profited massively from driving our economy off a cliff.
In exchange for fines and industry reforms (most of which arguably simply restate duties the banks already have), nobody goes to jail.

If we cave on the settlement, we send the message to giant financial firms that it’s okay to rip off millions of people and make obscene amounts of money doing so. Civil penalties will simply be part of the cost doing business, the law be damned.

Tell the Obama administration and federal banking regulators that you stand with Attorney General Eric Schneiderman and attorneys general like him who are fighting to hold banks accountable for criminal activity.

It’s incompatible with the health of our democracy to allow wealthy and powerful people off the hook after they have caused massive and widespread suffering. But at least one federal regulator seems to think Attorney General Schneiderman has a positive duty to do so.

Kathryn Wylde who sits on the Board of the New York Federal Reserve Bank and whose job it is to explicitly represent the public, unbelievably told the New York Times without any hint of shame that she told Attorney General Schneiderman:

“It is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ‘em or hate ‘em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

This is wrong on so many levels, it’s hard to articulate.

Fortunately, Attorney General Schneiderman isn’t buying it. But now that he’s being attacked for taking a stand, he deserves our support.

Tell the Obama administration and federal banking regulators that you stand with Attorney General Eric Schneiderman and attorneys general like him who are fighting to hold banks accountable for criminal activity.

Thank you for speaking out.