New York Attorney General Eric Schneiderman has hired former federal prosecutor Virginia Romano to work on the series of investigations around the RMBS working group he co-chairs. The interesting part of this to me is that Schneiderman did the hiring, rather than the Department of Justice.
Virginia Chavez Romano, a former assistant U.S. attorney in New York, will help Schneiderman as he coordinates with a federal task force on the mortgage meltdown, Schneiderman spokesman James Freedland said on Monday.
The Obama administration formed the task force in January to probe fraud and abuse in the mortgage-backed securities market. Schneiderman is co-chairman of the group. So far, little activity has been made public and federal authorities have been criticized for not pouring enough resources into the effort.
Romano, who led an investigation into mismarked mortgage-backed securities while an assistant United States attorney, is working closely with the task force, Freedland said.
“Deputy Attorney General Romano brings a wealth of experience to her role helping to oversee our office’s work investigating potential misconduct that led to crash of the mortgage market,” Freedland said in a statement.
Federal authorities are still not pouring resources into the effort. Romano will work directly with Schneiderman. It’s a sign that Schneiderman recognizes that the resources aren’t coming. As for Romano’s mismarked MBS investigation, it was an investigation into traders at Credit Suisse who were, among other things, ripping off the bank.
Meanwhile, remember that the idea was for Schneiderman to leverage his independence as a political actor into action on the working group. He could always threaten to walk if the investigation was being dragged out, and he would let everyone know who was responsible. He had this potential to call out the misdeeds of the federal law enforcement and regulatory apparatus, as a bargaining chip for accountability. This was said to me personally by people at the highest levels of Schneiderman’s office.
Does this strike you as what someone in that position would do?
Attorney General Eric Schneiderman had something of a star turn at one of the big fund-raisers featuring Bill Clinton and President Obama last night.
Before a ballroom full of supporters at the Waldorf Astoria, Schneiderman delivered the introduction for Clinton, and drew a contrast between the last two Democratic presidents and the Republican one who served in between [...]
In last night’s introduction, the attorney general offered the kind of partisan rallying cry—casting Romney’s candidacy as an extension of Bush’s presidency—that the more lightly partisan Cuomo has yet to deliver.
“Given how much is on the line for everyday Americans, why in the world would we hand over the White House to the same people that left our country in a much worse place than they found it?” Schneiderman said, according to the prepared remarks. “The same recipe for economic failure is what Mitt Romney’s serving. And I believe the American people will say, ‘Thanks, but no thanks,’ to a third term for George W. Bush.”
There wasn’t going to be a break from the working group anyway, but certainly not now. Schneiderman is poised to go down with the ship, which explains why he’s putting funds from his own office toward the effort. But since the “working group” seems to just be a PR conduit for other people’s investigations, and that it’s setting up merely for yet another settlement without a deterrent factor or much meaning behind it, I can’t see this effort succeeding.
Ultimately, that’s bad news for the housing market. I know everyone’s heavily invested in putting out a narrative about the housing “comeback,” but when the actors who broke the market don’t get held to account, and when the structural deficiencies created by that destruction never get fixed, the result is that the market will remain stuck. Witness the dropping indicator on May asking prices, which matches the slowdown in the recovery. Witness the spike in foreclosure filings in some areas of the country. You still have 16 million homeowners who are one bit of bad luck away from economic ruin. You still have Wall Street executives unharmed by creating such a situation.
UPDATE: George Zornick has more on this. I was amused by the part about Chuck Grassley at the end:
In March, Grassley criticized DoJ officials in a hearing for the department’s “terrible” record of prosecuting high-ranking Wall Street officials and institutions. DOJ later responded that it had brought “thousands of mortgage fraud cases over the past three years, and secured numerous convictions against CEOs, CFOs, board members, presidents and other executives of Wall Street firms and banks for financial crimes.”
This is news to pretty much everyone, so Grassley demanded a list. He just received that list today—past the deadline he gave—and while it was extensive, it didn’t break down any specific cases of mortgage fraud, because DOJ said it “does not maintain [such] statistical data.”
Absent from the list, in any case, was any high-profile prosecutions of Wall Street mortgage fraud that lead to the financial crisis, because it doesn’t exist.