Eric Schneiderman: This Millennium's Elliot Ness?

We here at the South Florida Law Blog decided to clock in a few hours this weekend, because if we didn’t we’d probably fall behind President Obama’s new man-in-the trenches Eric Schneiderman.

The New York Attorney General, only days into his appointment as the head of the newly-formed Residential Mortgage-Backed Securities Working Group has already issued subpoenas to 11 financial companies.

President Obama only announced this new investigative unit during Tuesday’s State of the Union, yet the “check”, or in this case the subpoena, is already in the mail.

If you were skeptical that Obama was still interested in the status-quo when it comes to the banks and doing business, may we present Exhibit A.

Eric Schneiderman is turning himself into a modern-day Elliot Ness.

You remember Ness don’t you?

The federal agent whose team of “Untouchables” couldn’t be bought off and helped bring down Al Capone?

Schneiderman too has the era of a man who will not be co-opted. If anyone can stay above the fray and not be reeled in by the banks and their money, he can.

Investigation Going After Cause of Housing Crisis

Schneiderman has stood up to the President before, openly opposing the settlement agreement that we here at the South Florida Law Blog have railed against. And now he is Obama’s point man for placing blame and creating accountability for causing the worst economic crisis in the US since the Depression.

The Huffington Post is reporting that outside of claims directly relating to robo-signing fiasco, the banks will not be released from the threat of prosecution for the vast majority of securities-related crimes.

Schneiderman said Friday that the settlement will not interfere with his investigation because the settlement money will be for conduct by the banks that took place after the housing market collapsed.

“Our working group is focusing on the conduct that related to the pooling and creation of mortgage backed securities,” he explained, “The conduct that created the crash, not the abuses that happened after the fact.”

For the first time we’re seeing someone attack the cause of the housing crisis, and not just the effect, which is why we’re optimistic.

Schneiderman added he’s confident the liability releases the banks would be granted in the settlement have been “narrowed.” In other words, his investigation and the settlement are no longer tied to each other. Which means he is free to go after the banks for their list of crimes, which is MASSIVE.

Banks Will Not Skate Under Schneiderman

Schneiderman wants to “make sure that we’re not releasing claims that obviously now are even more important to me because I’m investigating them.” Just like Ness, Schneiderman will find having the IRS on his side will likely give him the upper hand since it is now well accepted that the banks engaged in systematic tax fraud.

You need look no further than Oppenheim Law’s recent law-review article, “Deconstruction the Black Magic of Securitized Trusts” to see the world Schneiderman is now stepping into to fix.

The banks systemically and fundamentally failed to follow the rules which were set up to protect the homeowner. The improper securitization of “mortgage backed securities” was in fact never mortgage-backed, and due process took a back-seat in favor of expediency.

Bottom line, Schneiderman will have his hands full for quite some time.

Not a Prison Big Enough

Mitt Romney likes to remind us that “corporations are people, too”. But Romney better hope that is not true, because there is no jail or prison big enough to hold the banks for the rampant fraud they have committed. The truth is you can’t punish the banks the way you would a person, you have to hit them in the pocketbook.

And not just the shareholders, who up to now have received the brunt of the hit the banks have taken so far, thanks to their stocks going down the toilet.

You have to punish the officers, the directors, and the bondholders too, and we suspect Schneiderman shares our opinion on this.

President Obama, who only a year ago was trying to push Schneiderman away, has finally committed to a thorough and in-depth investigation and potential criminal liability for those institutions responsible for the current state of the housing market.

Schneiderman just might make Elliott Ness proud.