Attorney General Eric Schneiderman joined with other state attorneys general last year who were suing five large mortgage servicers. But he was disturbed by the shape of the agreement, and says banks wanted broad protection from lawsuits over other mortgage practices. So he started his own investigation.
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Some of the nation's biggest banks are reportedly getting close to a settlement with authorities over practices related to the so-called robo-signing scandal, which involved foreclosure paperwork. But the much-delayed settlement still faces a lot of challenges. New York Attorney General Eric Schneiderman is raising objections to highlight the role of big banks in the financial crisis.
From member station WNYC, Ilya Marritz reports.
ILYA MARRITZ, BYLINE: The attorney general of New York is one of the most high-profile law enforcement jobs in the country. There's Wall Street and the media glare. And Eric Schneiderman gets to follow in the footsteps of Andrew Cuomo, the current governor of the state and the son of former governor Mario Cuomo. Can't be easy.
ERIC SCHNEIDERMAN: Good afternoon, I'm Eric Schneiderman, I'm very happy to be here.
MARRITZ: Despite his low-key style, Schneiderman has drawn national attention in his first year in the job.
On a ride with the AG in his state-issued SUV, we pass the site of the Occupy Wall Street protests. Schneiderman didn't take part, but he agrees with some of the message.
SCHNEIDERMAN: People aren't sure what happened but they know that this was a manmade catastrophe, that there are people who caused the bubble and the crash.
MARRITZ: And Schneiderman is out for justice - his idea of justice. When he became attorney general a little over a year ago, Schneiderman joined with other state AG's who were suing five large mortgage servicers, including Bank of America and JP Morgan Chase. The idea was to get a settlement with these banks that could bring in aid for hundreds of thousands of troubled homeowners who'd been served faulty foreclosure documents. But the shape of this agreement disturbed Schneiderman. He says banks wanted broad protection from lawsuits over other mortgage practices - like how huge volumes of bad loans were made in the first place, and the creation of toxic mortgage-backed securities.
SCHNEIDERMAN: So I wasn't willing to provide a release that released conduct that hadn't been investigated, essentially. So we started our own investigation.
MARRITZ: Using New York's powerful Martin Act, which allows the state's top law enforcer wide powers of subpoena.
SCHNEIDERMAN: So this started to catch on and I guess the AG who was leading this effort decided he didn't particularly like my critique, so he - they removed me from the executive committee.
MARRITZ: This was in August. Tom Miller, the Iowa attorney general, and a fellow Democrat, strongly disputes this version of events. He says Schneiderman wasn't ejected, he quit. And Miller says, he wasn't about to give the banks some kind of blanket immunity. Either way, an ugly rift was now out in the open. Schneiderman is pushing ahead with his probe. He has more than a dozen lawyers on the case, and says they are finding, quote, "really interesting evidence of misconduct." But he isn't offering any specifics.
Jeffrey Naimon, an attorney who frequently represents banks in court, isn't ready to call Schneiderman's probe posturing. But he believes Schneiderman will find evidence only of bad judgment, not fraud.
JEFFREY NAIMON: Yeah, there were loans that were made that right now we'd look back and them and say, you know what? It was a mistake to make those loans.
MARRITZ: But...
NAIMON: Was it wrongdoing to make those loans? No.
MARRITZ: Naimon sounds confident, but people in the banking industry are watching the attorney general closely.
Eric Schneiderman was born and raised in Manhattan, the son of a successful corporate lawyer. He went to private schools, and got an early taste of the law while working as a deputy sheriff in a Massachusetts prison. Later, as a state senator, Schneiderman championed the rollback of a 1970s law that harshly punished possession of even small quantities of drugs. Criminal justice reform is far from high finance, but Schneiderman draws a common thread: the need for equal justice.
Eliot Spitzer, the former attorney general, says on the mortgage settlement issue, Schneiderman has already forced a change in thinking on the national level.
ELIOT SPITZER: We don't know where it will end up, but I think he has been a very good voice, saying that the position that had been taken by most state AGs and Washington was not sufficiently rigorous.
MARRITZ: However, if the other state AGs reach a settlement with banks over robo-signing, troubled homeowners could start to get checks in the mail. And if New York is not a part of it, Schneiderman will have to explain why homeowners in his state aren't getting help, and why it's worth it to continue investigating.
For NPR News, I'm Ilya Marritz.