Shahien Nasiripour continues his dogged financial reporting, this time at the Financial Times, on a story that seems superfluous at this point: the 50-state AG investigation of foreclosure fraud.

Perhaps an interesting story could be made out of what Tom Miller plans as a face-saving measure after the broad settlement fails. But the settlement itself is dead.

This is the seventh month in which reports have said that a deal is right around the corner. Nobody really wants to sign onto a deal, however: the banks don’t want to give up the money, and increasing numbers of AGs don’t want to give up the liability release.

In Shahien’s story, it’s telling that all the players are doing the arithmetic on what each bank would owe (with the alarming information that 80% of the funds would go to the federal government to parcel out, and only 20% to the states who are negotiating the deal). That sidesteps the fact that many AGs want to limit a liability release while the banks want to broaden it. In addition, New York AG Eric Schneiderman and his allies want an actual investigation on the depth of the problem before administering a settlement. So there’s no needle to thread.

The latest AG to stand with Schneiderman and against the attempts to whitewash the fraud of the big banks is Kentucky AG Jack Conway. He is up for re-election this year, and is known nationally by virtue of his unsuccessful challenge to Rand Paul for Senate in 2010. Conway, in conjunction with the Progressive Change Campaign Committee, sent an email to supporters aligning himself with Schneiderman.

The same Wall Street banks whose irresponsible actions led to our nation’s economic collapse are now pressuring all 50 states to give them legal immunity. The banks want to block any criminal or civil accountability for actions that have yet to be investigated.

Attorneys General from Delaware, Minnesota, Nevada and New York have been fighting back. Today, I want to make a clear statement in support of Wall Street accountability and against immunity for banks — and I ask you to join me on this statement:

“Today’s economic crisis was caused by Wall Street acting improperly. Every American has paid the price — with families losing their homes, investors losing their money, and many Americans losing their jobs. There should be absolutely no criminal or civil immunity given to banks for activity that has not yet been investigated.”

Several things are important here. Kentucky didn’t really have a big housing bubble – Conway is supporting this on principle, rather than in service to a wide swath of dispossessed and struggling borrowers who are victims of fraud. Second, he writes this in the context of an election which has tightened up minimally. So he obviously finds this to be a winning issue on the campaign trail. Third, it would be tempting to just ignore a proposed settlement that isn’t going to happen. Conway sees political advantage in stamping on this process, which is already flailing.

The PCCC put this out with a petition, getting supporters to sign on to Conway’s vision that there should be no liability release without an investigation. Conway becomes at least the sixth AG – joining Schneiderman (NY), Beau Biden (DE), Martha Coakley (MA), Catherine Cortez Masto (NV) and Lori Swanson (MN) – in objecting to a settlement without proper investigation.

Kamala Harris, the California AG, is not on that list, and in the one bit of news in Shahien’s report, he writes that the state is meeting separately with the banks:

Separately, lawyers for California’s attorney-general are meeting the large banks, people familiar with the matter said. California officials declined to comment [...]

Kamala Harris, California’s attorney-general, has called for large debt relief for strapped homeowners. About 2m California homeowners owe more on their house than it’s worth, according to information provider CoreLogic.

Ms Harris had considered joining New York and Delaware in their investigation into Wall Street’s role in packaging mortgages into faulty securities. Such a probe would delay any settlement.

Should some banks reach an accord with California, it would likely provide a reference point for nervous bank investors. The state houses one of every seven US homeowners with a mortgage.

The fact that Harris flirted with joining the fraud investigation of Biden and Schneiderman, and then went off to cut her on deal, reflects very unfavorably on her.

More on the Conway announcement from the Huffington Post.