Eric Schneiderman vs. Wall Street and its political servants

New York's new attorney general takes on the nation's most powerful faction

Topics: Wall Street,

It’s rare to be able to write in praise of a high elected official, but Eric Schneiderman — New York’s recently elected state Attorney General — thus far deserves it.  As a State Senator, he was one of the leaders in reforming that state’s decades-old, oppressive Rockefeller drug laws, waging war on what he called “the failed drug policies of the past” — harsh, mandatory prison terms for users — and replacing them with non-punitive provisions “to expand drug treatment as an alternative to prison [and] give judges more discretion to divert drug-addicted individuals convicted of non-violent drug crimes to treatment” (politics is never pure; the price for those reforms were longer sentences for so-called “drug kingpins”).  He is also an outspoken advocate for full-scale marriage equality, joining former Reagan Solicitor General Ted Olsen in decrying “civil unions” as “a badge of inferiority that forever stigmatizes the relationships of committed same-sex couples as different, separate, unequal and less worthy.”

But most noteworthy and impressive is his seemingly solitary fight to hold Wall Street accountable for the vast corruption and criminality that spawned the 2008 financial crisis, which continues to impose serious financial hardship and anxiety on hundreds of millions of people around the world.  As the U.S. DOJ steadfastly looks the other way and other state Attorneys General prepare to settle all potential charges in exchange for payment of woefully inadequate “cost-of-doing-business” fines, Schneiderman is doing the opposite, aggressively expanding his investigation in a way that could single-handedly sabotage the efforts to permanently protect this industry from accountability:

The New York attorney general has requested information and documents in recent weeks from three major Wall Street banks about their mortgage securities operations during the credit boom, indicating the existence of a new investigation into practices that contributed to billions in mortgage losses.

Officials in Eric T. Schneiderman’s office have also requested meetings with representatives from Bank of America, Goldman Sachs and Morgan Stanley . . . The inquiry appears to be quite broad, with the attorney general’s requests for information covering many aspects of the banks’ loan pooling operations. . .

The requests for information by Mr. Schneiderman’s office also seem to confirm that the New York attorney general is operating independently of peers from other states who are negotiating a broad settlement with large banks over foreclosure practices.

By opening a new inquiry into bank practices, Mr. Schneiderman has indicated his unwillingness to accept one of the settlement’s terms proposed by financial institutions — that is, a broad agreement by regulators not to conduct additional investigations into the banks’ activities during the mortgage crisis. Mr. Schneiderman has said in recent weeks that signing such a release was unacceptable.

The investigation is still in its early stages but, at least preliminarily, it seems clear that Schneiderman is unwilling to permit the type of impunity that has been granted over the last decade to lawbreaking telecoms, Bush officials, NSA eavesdroppers and CIA torturers to be quietly extended to Wall Street tycoons, whose plundering precipitated a massive worldwide financial crisis, only to be even more enriched and empowered by the political response.  Earlier this month, Scheinderman also issued broad and sweeping subpoenas to two large multi-billion-dollar investment funds and their lawyers at the heart of the mortgage fraud scandal, independently jeopardizing the collective efforts to shield those culprits from accountability:

As state attorneys general work on a potential settlement of the nationwide probe of home-loan servicers, Mr. Schneiderman, a Democrat, has expressed concern that a deal could let the companies escape liability for future legal claims.

“We believe it’s critical that attorneys general retain their ability to conduct comprehensive investigations of the mortgage crisis and follow the facts wherever they lead,” a spokesman for Mr. Schneiderman said.

Further evidence of Schneiderman’s unwillingness to allow the law to be exploited as a corrupted instrument for corporatism is found in his threats to sue the federal government with “aggressive legal action” over its failure to conduct legally mandated environment impact studies for proposed drilling in the Delaware River Basin (which provides 50% of New York’s drinking water).  Those threats predictably prompted objections from “oil and gas industry representatives” accustomed to lawless subservience from government officials: especially from the regulatory agencies mandated to compel industry compliance with the law yet which are typically run by former industry officials who do the opposite (as epitomized by the BP official chosen by the Obama administration as a top regulator overseeing land and minerals management).

An Attorney General who simultaneously works for more lenient laws for ordinary Americans committing trivial drug offenses while demanding serious accountability for the nation’s most powerful factions is a rare and noble aberration indeed:  one who seems openly hostile to the two-tiered justice system that operates to protect lawbreaking political and financial elites while punishing the powerless.  Of course, the last politician who tried to impose meaningful accountability on Wall Street was New York Attorney General and Governor Eliot Spitzer, whose career was abruptly destroyed by a still-very-strange-and-difficult-to-understand massive federal law enforcement effort into his prostitution-hiring activities.  As Jay Ackroyd said of Schneiderman yesterday in response to my praise of his actions:  “He’d best have no skeletons. None.”  It is worth keeping a watchful eye on Schneiderman’s investigative efforts and doing everything possible to provide what will undoubtedly be much-needed support if, as appears to be the case, he is serious about taking on these pernicious factions and impeding the conspiring by the political class to protect their benefactors/owners.

Glenn Greenwald

Follow Glenn Greenwald on Twitter: @ggreenwald.

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