President Barack Obama has proven willing to do something Gov. Andrew Cuomo has so far been reluctant to do: give Attorney General Eric Schneiderman more investigatory powers.
The president recently tapped Schneiderman to co-chair a new joint mortgage-fraud investigation unit, giving him access to more resources and more ground troops to go after fraud and abuse on Wall Street. The move came as a shock to many, considering Schneiderman has been one of the most vocal critics of the White House’s attempts to finalize a settlement with the major U.S. banks over mortgage securities.
Schneiderman spoke to City & State about his new responsibilities, his predictions on a final settlement and his fluctuating relationship with Cuomo’s office.
City & State: Were you surprised by the president’s announcement?
Eric Schneiderman: We had been talking about the possibility for a joint collaboration for a long time, so I wasn’t surprised in that sense. I was pleased to be asked, and honored to be asked, and [I’ve been] working very hard with my colleagues ever since.
C&S: Why now?
ES: From my point of view, when I took over as attorney general, I learned that there was a multistate investigation by a fairly large group of AGs, and that they were attempting to negotiate a settlement with a bunch of banks over abuses in the foreclosure process. I also learned that the banks, understandably enough, wanted as broad of a release as possible that grants them immunity from all of their alleged misconduct. Stuff that had nothing to do with foreclosure abuses, things that created the bubble in the housing market and brought about the crash. I took a hard line that we shouldn’t release that sort of conduct and we shouldn’t release claims that haven’t been investigated, and started my own investigation. Over the course of going back and forth with my federal counterparts about our investigation and their efforts to negotiate a settlement, it became clear that there were some areas that we could do a lot of really good work on if we collaborated. There were a variety of federal agencies that had different pieces of the puzzle. We agreed that a cooperative investigation was the way to go. Took us a while to work out some of the details. And last week I was very proud to be there when it was announced. And the goals of the effort really are to establish accountability and hold people accountable, those who caused this harm, make sure we get relief to the millions of people who are injured. In New York, one in 10 homes is headed toward foreclosure. Nationally there are 15 million families that are underwater. That means their homes are worth less than the mortgages they’re trying to carry.
C&S: Does this change the dynamics of the negotiations for a settlement?
ES: I think the settlement has been steadily improving since this process started. Most significantly, the releases have been narrowed to give us the ability to pursue the investigation, and accountability and relief for those who were injured, both borrowers and investors, people who bought these bad securities, which included a lot of pension funds and mutual funds. And the third element is, we can’t let them rewrite history. We have to get the facts of this out. This is not caused by an earthquake or a tsunami. This was caused by human conduct. This was caused by reckless deregulation, and some people just being too greedy for their own good. Brought down the economy, threw millions of people out of work. And we intend to hold them accountable and get the facts out, so history doesn’t repeat itself.
C&S: Robert Kuttner from The American Prospect predicted Wall Street allies in the Obama administration would try to reduce your role to a “symbolic fig leaf.” Are you anticipating that?
ES: No. I think the fact the president elevated this by putting it in his State of the Union address, and I think comments made by Attorney General [Eric] Holder and others when the task force was announced, indicate to me they’ve made the determination to go forward. They’re taking ownership of this. I’m certainly going to work hard to make sure we get the job done. I would be more worried if we didn’t have all of the necessary agencies working together in a coordinated fashion to go after this, because it’s difficult to do in isolation. I would think the prospects of us getting the kind of comprehensive investigation and broad relief we need would be very difficult.
C&S: And this means more resources for your own investigations, more lawyers, more ground troops…
ES: It’s many multiples. We have a big office, but we have a lot of responsibilities. We represent the state; we have lots going on in areas of the environment, labor, public integrity and other things. So if the New York State Attorney General’s office has 12 or 15 people working on a matter that’s big, it’s hard for us to get the kinds of results that you really want to get, to see relief for homeowners and relief for investors. Having hundreds of additional resources, investigators, lawyers, accountants from the federal government, makes it much more likely that we’re going to be able to attain significant relief. There’s areas we just don’t have jurisdiction. If you don’t have the Internal Revenue Service, it’s very hard to pursue possible violations of the tax law. If you don’t have the Consumer Financial Protection Bureau, you can’t enforce some of these regulations coming out of Dodd-Frank. So having everyone come together makes it much more likely we’re going to get a good result. It was the right decision. I’m glad the president made it. I’m going to work as hard as possible to make sure we get a good result for the people of New York and the people of the country.
C&S: On the mortgage settlement, they’re saying it could be $25 billion. Is that enough? Some people think it should in the hundreds of billions.
ES: The major issue is what claims you give up. If you give up narrow claims like robosigning and foreclosure abuse, you get strict rules going forward with penalties and a monitor to make sure things are done right going forward. And you get some relief for homeowners in the form of principal reductions, but you don’t give up your ability to go after the securities-fraud claims and other things my joint working group is going after. The amount you receive needs to be looked at in the context of what claims you’re agreeing to wave. That’s why my strong position on the releases was a part of us getting to where we are today.
C&S: Why the shift from the White House on mortgage fraud?
ES: I can’t say why they’re doing what they’re doing. Maybe they got fed up with their attempts at bipartisan collaboration with people who refuse to collaborate. It certainly made sense as our conversations emerged, just on the merits, that a joint investigation was the right way to proceed. I do think the president is reacting partly to the overreaching on the other side. That’s really what the debate is about, if you boil it down, in Washington. This is a debate over whether we should have the same set of rules from everyone, everyone should pay their fair share, get a fair shot, which is really what the president said in his speech.
C&S: Are you optimistic about the outcome?
ES: We’re still working out details of the settlement. As far as the releases go, I do feel comfortable that the final releases will enable our joint investigation to proceed.
C&S: Have you reviewed the Assembly’s plan to close the Indian Point nuclear facility?
ES: I have not. This is a huge win for our office. The fact that the Nuclear Regulatory Commission, which is an agency that’s usually pretty friendly to the industry—for them to reject Indian Point’s request for more than a hundred exemptions from fire-safety requirements is a major, major victory. Our position is that we want to make sure that everyone abides by the rules. And that’s the really the theme of all of our activities in this office over the last year: one set of rules for everyone. Everyone has to abide by the rules. And that includes nuclear power plants. And if you want a nuclear power plant, you better make sure you’re taking care of issues like fire safety. We’ve also gone after Indian Point for failing to even consider seismic problems, even after what happened in Japan. I was sitting here in my office, and everyone says “Oh, we don’t have earthquakes here,” when all of the sudden the building started to sway a couple months ago. They better make sure they have emergency plans to take care of any situation.
C&S: On hydrofracking, there’s a rumor that you’re in the process of developing a landowner bill of rights. Can you comment on that?
ES: No. We’ve got a variety of things going on in the area of hydrofracking. We’ve been looking at issues related to the disclosures made by the oil and gas companies, looking at the federal government, which in our view, through the Army Corps of Engineers, issued regulations for hydrofracking in the Delaware River Basin without doing a required environmental impact statement. So we’re seeking to enforce the rules there too, but I don’t want to comment on any investigations or any work that’s in progress.
C&S: Do you find it ironic that the president wants to give you more investigatory power, while Governor Cuomo does not?
ES: No, look, we’re doing a lot in public integrity. For the first time ever, we have public integrity officers in all the regional offices. We have created a new taxpayer protection bureau to make sure that state contracts are scrutinized. We have a lot of good collaborative relationships in this area with the executive branch. Obviously we don’t talk about ongoing investigations, but since we’ve expanded our activities and expanded our resources, that’s going to be a busy area for this office over the next year or two.
Tags: Army Corps of Engineers, Attorney General, banks, Barack Obama, Consumer Financial Protection Bureau, deregulation, Dodd-Frank, Eric Holder, Eric Schneiderman, foreclosure, Hydrofracking, immunity, Indian Point, Internal Revenue Service, investigation, landowners, mortgage, mortgage fraud, Nuclear Regulatory Commission, Robert Kuttner, securities fraud, settlement, state of the union, The American Prospect, Wall Street, White House
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