CSI: Wall Street

Several recent reports worth noting on the Residential Mortgage-Backed Securities Working Group that President Obama announced in his State of the Union address. Rachel Maddow brought New York Attorney General Eric Schneiderman onto her show [timestamp 4:40] to discuss the RMBS Working Group’s charge. Schneiderman and fellow AGs Kamala Harris (CA), Beau Biden (DE), Lisa Madigan (IL), Martha Coakley (MA), Catherine Cortez Masto (NV) have bucked the Justice Department and fellow state AGs who worked to cut a deal on limiting bank investigations earlier this year. Schneiderman, et. al. weren’t about to hand out “Get Out of Jail Free” cards. This pressured the Obama Justice Department to get more serious about holding the banks accountable.

On Wednesday, President Barack Obama tapped Schneiderman to co-chair a joint federal-state task force to pursue criminal charges related to abusive mortgages and the bundling of those loans into investments. Some observers suggested the appointment was intended to blunt Schneiderman’s opposition to the multistate settlement. Schneiderman has said he’s not about to let bankers off the hook.

The draft released Friday of a $25b foreclosure fraud settlement between states and five big U.S. banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial — caught some critics by surprise, including Rolling Stone ’s Matt Taibbi, who has followed the banking crisis more closely than most. It appears narrower in scope than the banks originally wanted and skeptics expected. It covers the robo-signing fraud, leaving the rest wide open.

Over at Firedoglake, dday is still wondering how much enthusiasm there really is in the Obama Justice Dept. for these investigations. (The staffing so far looks light.) But Schneiderman, the “Sheriff of Wall Street,” appears to have joined for the expanded jurisdiction the federal panel affords, as well as the additional manpower of the IRS: “We have the Internal Revenue Service in because there are huge tax fraud implications to some of the stuff that went on.” Because of how the mortgages are handles in tax law, dday explains, securitization of improperly qualified mortgages could render “the whole investment vehicle a massive tax fraud.”

The IRS has an ENORMOUS amount of available power here. And Schneiderman cited it specifically. That could be a powerful lever to get the kind of real accountability on this issue. When Yves [Smith - Naked Capitalism] looked into this in April she concluded that the IRS wasn’t interested in opening this can of worms. And yet they’re part of this working group, I would assume at the insistence of Schneiderman.

Plus, now that he is there, and especially if Schneiderman continues to do interviews, his presence on the panel (even as only one of five co-chairs) may give him the leverage he needs to move forward aggressively. If Schneiderman should leave the panel because of foot-dragging or stonewalling from Justice, his departure could embarrass a White House in the midst of a reelection campaign. Both Schneiderman and Obama have to know that.

[h/t Digby]