Is it too little too late?
During his State of the Union address Tuesday night, President Obama announced the creation of a special unit to investigate misconduct and illegalities that contributed to both the financial collapse and the mortgage crisis. The office, part of a new Unit on Mortgage Origination and Securitization Abuses, will be chaired by Eric Schneiderman, the New York attorney general.
Schneiderman praised the president, saying he picked the right man to go after the big banks and resolve the mortgage crisis. “I would like to thank President Obama for his leadership in the creation of a coordinated investigation that marshals state and federal resources to bring justice for the victims of the misconduct that caused the mortgage crisis. The American people deserve a robust and comprehensive investigation into the global financial meltdown to ensure nothing like it ever happens again, and today’s announcement is a major step in the right direction,” Schneiderman said.
“The goal of this joint investigation will be threefold: to hold accountable any institutions that violated the law; to compensate victims and help provide relief for homeowners struggling from the collapse of the housing market, caused in part by this wrongdoing; and to help us finally turn the page on this destructive period in our nation’s history,” reads a White House document outlining the objectives.
The unit will not supersede the efforts already underway by the Department of Justice. Instead, it will operate as part of the president’s Financial Fraud Enforcement Task Force. In addition to Schneiderman, the unit will be co-chaired by Lanny Breuer, assistant attorney general at the Criminal Division of the Department of Justice, Robert Khuzami, director of enforcement at the SEC; John Walsh, a U.S. attorney in Colorado, and Tony West, assistant attorney general in the Civil Division at DOJ.
News of the new mortgage unit comes amidst reports of a potential settlement between the five biggest banks, the Obama administration and the 50 state attorney generals. Under the deal, banks would agree to follow existing laws against abusive foreclosures and set aside $25 billion to both help homeowners who are underwater on their homes or who were wrongfully foreclosed. The agreement has been in the works for months, with disagreements over the level of legal immunity granted to banks accused of wrongdoing, and the scope of violations covered by the deal.
Critics of the pending settlement have argued that the president should couple the financial relief for homeowners with a robust law enforcement effort targeting lawbreaking by big banks. Schneiderman has been among the settlement’s most prominent critics for months, insisting that a deal not release bankers from criminal charges, and urging AGs to look into violations outside the foreclosure process, including issuing fraudulent loans and improprieties in the packaging of those loans into complex bonds that would become toxic assets.