Many of us have been troubled that bankers and financiers have gotten off and paid no price for the financial crisis that obliterated millions of jobs and trillions of dollars in wealth--and, indeed, the CEOs and Wall Street folks are reaping huge pay packages again. The slaps on the wrist for Goldman Sachs and J.P. Morgan are just two examples. One person--New York's attorney general, Eric Schneiderman--is not giving up and now he's using his power to block a sweetheart deal for Bank of New York and Bank of America.
Per Gretchen Morgenson:
The New York attorney general is moving to block a proposed $8.5 billion settlement struck in June by Bank of New York Mellon and Bank of America over troubled loan pools issued by Countrywide. A lawsuit filed late Thursday accuses Bank of New York of fraud in its role as trustee overseeing the pools for investors.
In papers filed in New York State Supreme Court, lawyers for Eric T. Schneiderman, the attorney general, contended that Bank of New York misled investors about its conduct as overseer of the securities. The bank also breached its duties to investors by agreeing to the deal with Bank of America, according to the complaint, because the trustee is conflicted and “stands to receive direct financial benefits” as a result of the agreement. [emphasis added]
Fraud? In the banking business? I'm shocked, shocked, shocked...
Yup:
As announced by Bank of New York, which is overseeing 530 mortgage pools issued by Countrywide, the deal would require Bank of America to pay $8.5 billion to investors holding the securities. The unpaid principal amount of the mortgages remaining in the pools totaled $174 billion. Lawyers representing 22 institutional investors, including the Federal Reserve Bank of New York, BlackRock and Pimco, contended the deal was favorable.
But other investors in the Countrywide pools who were not part of the settlement negotiations between Bank of New York and Bank of America complained that the terms were inadequate. Among the criticisms made by a group of investors known as Walnut Place were that the negotiations were conducted in secret and that Bank of New York was conflicted as a negotiator because Bank of America agreed to cover all its costs and liabilities relating to the deal.
Mr. Schneiderman’s contention that Bank of New York breached its duties to investors is significant because a trustee that agrees to oversee loan pools like those issued by Countrywide must abide by the rules governing the securities. Such rules require that lenders deliver to the trust complete and original mortgage documents for each loan in a pool, for example, and require that the trustee notify investors when such loan documents are missing.
Schneiderman has already been a leading force in trying to organize other states to stand in the way of the general impulse to sweep all the financial scams under the carpet.
There is a big point here to this: I still believe that progressive positions are the majority position of most people. BUT...people are smart: they look around and see those who created the mess just getting off and not being held responsible and, in fact, becoming even more wealthy. They see politicians protecting the bankers.
Why vote for people who won't have your back?
Schneiderman's actions are, in the larger sense, a way of restoring some faith in the notion of equal justice under the law, that no one is above the law.