As yet another deadline in the foreclosure fraud settlement passes, an intriguing dynamic is taking hold. Attorneys General with aspirations for higher office – and that describes almost all Attorneys General – are feeling pressure, entirely from the side which doesn’t want to see a broad settlement and a whitewash for the banks. Two more instances of that have emerged in recent days.

In California, the Democratic Lt. Governor has joined the fray in pressuring AG Kamala Harris not to accept a bad deal:

Lt. Gov. Gavin Newsom has joined a group of California union leaders, activists and politicians in calling the direction of negotiations “a deeply flawed settlement proposal with the banks at the heart of the nation’s mortgage crisis.”

Harris has emerged as a key player in pursuing the nationwide settlement with major U.S. banks accused of wrongfully foreclosing on homeowners. She has been urged to take a hard line by consumer groups seeking help for homeowners devastated by the mortgage crisis.

The letter by Californians for a Fair Settlement, which The Times obtained Thursday, calls on Harris to reject a settlement that lacks significant principal reduction for troubled California homeowners, has overly broad liability release language that would hamper future investigations into bank practices and would require banks to pay about $20 billion.

The group, in its letter, called that amount “outrageous” and “a figure which might not even be enough to cover damages for the state of California, let alone the entire country.”

The letter has a lot of familiar signatories – Maxine Waters, the California Nurses Association, SEIU and the Alliance of Californians for Community Empowerment. But Newsom’s inclusion is critical. It’s no secret that Newsom and Harris covet the Governor’s office, perhaps as early as 2014 if Jerry Brown doesn’t seek re-election. Both of them are already raising funds for 2014. Newsom is calculating that getting on the right side of the foreclosure fraud issue will help him in the primary. And he is signaling that he would use a bank-friendly settlement sanctioned by Harris as a key campaign theme.

And it’s not just a stick being used in primaries. Rep. Jay Inslee (D-WA) wrote to Attorney General Eric Holder yesterday, asking him not to settle with the big banks absent an investigation. Here’s some of the letter.

As a former prosecuting attorney, I understand how important it is to fully investigate any alleged wrongdoing in order that those responsible may be prosecuted to the fullest extent of the law.

A full investigation is important for two reasons. First, we can’t fix what we can’t see. For years, banks and mortgage companies have been taking advantage of working families and investors. To respond we need to know everything they have done and punish those responsible. It is a sad commentary on our society that protestors standing up for American families in this mess get carted off to jail while individuals and companies have yet to be held accountable.

Second, to take the necessary steps to stave off yet another flood of foreclosures we need tens of billions more than what is reportedly being discussed as part of a settlement. Financial institutions got us into this mess, they should play the leading role in helping families get out of it.

What matters here is that Inslee is a 2012 gubernatorial candidate in Washington state. His main competition? Attorney General Rob McKenna (R), who is on the foreclosure fraud working group negotiating with the banks. In an email blast to supporters of his campaign, Inslee went after McKenna directly:

If someone borrowed your car and wrecked it, would you just hand over your keys the next time they wanted to use it — no questions asked? No. But that’s what U.S. Attorney General Eric Holder and a number of state attorneys general, including Washington state Attorney General Rob McKenna, are on the verge of doing with Wall Street banks.

Documents obtained by the media indicate they are close to signing a deal that would let the Wall Street banks most responsible for the subprime mortgage crisis off the hook with nothing but a slap on the wrist — letting them get back to business as usual without any real reforms or accountability.

That’s wrong, and I need your help to stop it.

Inslee has a petition on his website for Holder and McKenna, and he’s over 3,300 signers.

Aside from the specific intent of stopping a bad settlement, we’re seeing a theme emerge of no free passes for Wall Street banks. Whether Democratic or Republican, Attorneys General who seek higher office and are flirting with the settlement are being targeted by opponents as tools of the big banks. The settlement is becoming toxic.