As you may know, back in late January New York Attorney General Eric Schneiderman agreed to a relatively toothless settlement over mortgage servicing and foreclosure issues in exchange for becoming a co-chair of a task force designed to investigate and prosecute fraud in the securitization market. According to Schneiderman, this would focus resources on “the bubble and the crash,” the events that truly wrecked the economy, and both hold those who committed wrongdoing accountable and provide ongoing consumer relief to those who through no fault of their own found themselves suffering in the aftermath of the financial crisis.

Those were the key selling points of the task force, more formally known as the Residential Mortgage Backed Securities (RMBS) working group. In reality, the task force ended the split within the Democratic Attorney General ranks over the settlement, and created the conditions to finalize it. The goal was more political, to show that the Administration had an interest in accountability for the foreclosure crisis, and in ensuing months, to put on the board a big number of consumer relief that Your Government provided to homeowners. Never mind that the bulk of that relief, over 80%, has thus far consisted of short sales, which banks were already doing for a year prior to the settlement, and which results in the individual losing their home anyway. But that headline number sure looks good in the papers.

Meanwhile we’ve heard almost nothing about this RMBS working group. It took the group four months to hire a coordinator. And there’s ample evidence that the group merely takes credit for ongoing investigations that would have proceeded at their own pace. Nothing new has been generated so far. And what has Eric Schneiderman, a co-chair of this working group, been up to? Well, he’s issued subpoenas to banks over the unrelated Libor scandal. And he’s been very firm with the energy drink industry. But this latest foray is really unseemly, turning an apolitical law enforcement role into really just a political actor.

The New York attorney general is investigating whether some of the nation’s biggest private equity firms have abused a tax strategy in order to slice hundreds of millions of dollars from their tax bills, according to executives with direct knowledge of the inquiry.

The attorney general, Eric T. Schneiderman, has in recent weeks subpoenaed more than a dozen firms seeking documents that would reveal whether they converted certain management fees collected from their investors into fund investments, which are taxed at a far lower rate than ordinary income.

Among the firms to receive subpoenas are Kohlberg Kravis Roberts & Company, TPG Capital, Sun Capital Partners, Apollo Global Management, Silver Lake Partners and Bain Capital, which was founded by Mitt Romney, the Republican nominee for president. Representatives for the firms declined to comment on the inquiry.

I wrote about management fee conversion when it came up a couple weeks ago. This involves private equity fund managers waiving their management fees charged to investors, in exchange for an allocation of future profits. The managers get paid out eventually if the firm does well. And their profits than get computed as carried interest, a capital gain taxed at a 15% rate, rather than a management fee, income taxed at 35%. This adds up to millions of dollars every year saved in taxes. The savings for Bain Capital partners, including Mitt Romney, could go as high as $200 million, according to one law professor.

So should somebody take a look at this? Sure. Should it be the Attorney General of New York, appointed by the President to a separate task force, with close ties to the Administration, in the middle of an election campaign where the subject of scrutiny is in this case the private equity firm of the President’s opponent? It would look wrong for the Justice Department to take this up, but I guess it’s considered fair game for a state Attorney General with close ties to the White House.

And this isn’t the first time Schneiderman has gone there. In July, he issued subpoenas to determine whether tax-exempt groups made secret campaign contributions to subsidiaries to avoid disclosure. You would be excused for thinking that the NY State Attorney General’s office has become the investigative arm for “ripped from the headlines” campaign-related incidents. (The subpoenas in the management fees case were issued in July, while the Gawker documents that revealed the management fee issue at Bain didn’t come out until late August. But to believe that the two were unrelated, you would have to ignore the massive amount of opposition research that floats around campaigns many months before reaching the public eye.)

Maybe all this falls under Schneiderman’s purview. But of course, so does fraud in the securitization market, and we haven’t heard a thing from that investigation. Schneiderman claimed in early August that a Romney administration would shut down the investigation, but it’s hard to notice whether or not it has been shut down already.

Schneiderman may not be on the roster of speakers at the upcoming Democratic National Convention. But he appears to be providing a much more valuable service.

Postscript: Groups like Campaign for a Fair Settlement and others said just a few weeks back that they would have until Labor Day to exert pressure on the Justice Department and the relevant parties to get a meaningful investigation into gear. Labor Day is tomorrow, and nothing is happening. Moreover, Schneiderman vowed that, if he was being slow-walked on the task force to the degree that they did not pursue real investigations within six months, he would walk away from it. Just thought I’d mention all that.