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September 13, 2011

Minnesota AG Swanson Backs Schneiderman: No Settlement With the Banks Without Investigation

Posted in: Uncategorized

Minnesota Attorney General Lori Swanson has released a letter that opposes giving a broad release to banks on foreclosure fraud in exchange for a quick settlement.

In the letter, Swanson writes that “the banks should not be released from liability for conduct that has not been investigated and is not appropriately remedied in any settlement.” Specifically, she refers to “liability for securities claims or conduct arising out of the securitization of mortgages or liability arising out of the use of the Mortgage Electronic Registry System (“MERS”), where those claims have not been investigated or fairly addressed through the settlement.” She adds that bank officers should not be released from criminal liability in a civil settlement.

Swanson lines up with New York Attorney General Eric Schneiderman, then, in saying that she would not sign off on any broad settlement without an actual investigation. But she actually goes a bit further. Swanson writes that due process rights of individuals cannot be impeded or compromised by any settlement. A settlement among AGs could never preclude private action by individuals, but because AG lawsuits would invariably aid efforts by individuals to sue over irregularities in the securitization or foreclosure process, in a way this would nullify any settlement. In addition, Swanson notes that the FHFA has filed lawsuits against 17 banks over mortgage backed securities, and that “we should applaud these efforts and take no action to impede them… we should fully welcome and support all legitimate efforts to investigate the banks and to hold them accountable for their unlawful activity, which has been enormously destructive to this country and our citizens.” Simply put, this does not sound like someone who will allow a whitewash of a settlement.

Danny Kanner, a spokesman for Schneiderman, responded by email to the Swanson letter. “We have received Attorney General Swanson’s letter and agree that any agreement must not prevent attorneys general investigating the mortgage crisis from following the facts wherever they lead.”

What’s unique about this development is that it suggests a potential silent majority in support of Schneiderman’s view. I’ve been following the foreclosure fraud issue for a long time, and the state AG investigation since its inception. Lori Swanson hasn’t really come up. I know there are some other AGs who haven’t expressed publicly their reservations about a settlement without an investigation, but until this point, only Beau Biden and Catherine Cortez Masto and Martha Coakley have been willing to go on the record. And all of them were pretty deeply involved from the start. With Swanson coming forward, it shows that Schneiderman’s well of support is deeper than at first suspected. Perhaps this will lead to a flood of more AGs coming out in subsequent days.

That Swanson comes from a neighboring state to Tom Miller shouldn’t be discounted, either.


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