ERIC SCHNEIDERMAN | The Man The Banks Fear Most

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The Man The Banks Fear Most

The Man The Banks Fear Most

This was probably written mainly because of last week’s NY Daily News report on the Foreclosure/Mortgage Unmanned Task Force.


ERIC SCHNEIDERMAN-

In February 2011, one month after he’d been sworn in as New York state’s attorney general, Eric Schneiderman sat down with the staff attorney who’d been delegated to track the negotiations that the 50 state attorneys general and the Obama administration were conducting with five of the country’s biggest banks. A few months earlier, the story had broken that the banks had been “robo-signing” thousands of notices foreclosing on homes. Instead of assessing how far behind in their payments the homeowners had fallen or seeking to modify the terms of their mortgages, the banks had employed junior staffers, some hired right off the street, to sign hundreds of foreclosure documents daily, though the banks’ title to many of the properties was uncertain. Even when the banks’ claims to ownership were clear, robo-signing violated numerous state laws requiring due diligence before a bank can foreclose on a home.

The scandal had prompted a number of banks—Bank of America most prominently—to suspend their foreclosures for a while. The Justice Department, the Department of Housing and Urban Development, and the state attorneys general had initiated talks with Bank of America, as well as JPMorgan Chase, Citibank, Wells Fargo, and Ally Financial to arrive at a settlement for these abuses. As the only state law-enforcement official with direct jurisdiction over Wall Street, Schneiderman had been named to the committee the attorneys general had established to negotiate with the banks. He asked his aide how the talks were going.

“I was told it was being handled,” he says. The administration, his aide informed him, had proposed that the banks come up with $20 billion for aggrieved homeowners and former homeowners. Schneiderman wasn’t satisfied. What documents, he asked, had been subpoenaed? None, he was told. Who’d been called in to testify? Nobody, he was told. Most important, what did the banks want in return for paying the penalty? The aide responded that the issue had never been raised. Schneiderman was shocked.

“This didn’t make any sense,” he says. “You can’t negotiate anything like this without knowing what you’re giving up. We get $20 for what? A tie clip? A car?”

Schneiderman had been a successful Wall Street attorney before he turned to public-interest law and then served 12 years as the de facto leader of liberal Democrats in the New York Senate. He’d represented banks and exchanges in complex fraud litigation. He knew that the banks wouldn’t enter negotiations without expecting, at the very least, immunity from any lawsuits emanating from the robo-signing.

[ERIC SCHNEIDERMAN]

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