Schneiderman turns out to have a lot of leverage. Although the outlines of a narrow deal on the legal problems of mortgage servicers have been leaked, Schneiderman has not yet signed off on the deal. As noted, he has already gotten major concessions. The deal will only address the relatively narrow (but outrageous) abuse of robo-signing, and nothing in it will provide release from criminal prosecutions. Other details are still being negotiated. It is likely that Schneiderman will not give his final assent until he receives assurances on who will really be in charge of these broader investigations and with what level of resources.
The other main reason Schneiderman joined: The New York A.G. may have plenty of legal authority, but what he does not have is sufficient ground troops. In a scandal like this one, where the frauds and criminal misrepresentations are buried in millions of documents, it takes very major investigative resources, of the sort that the FBI, the IRS, the SEC, and the force of postal inspectors have, and the New York A.G. simply doesn’t. Something like a thousand Federal investigators and prosecutors brought crooks to justice in the savings and loan scandals of the late 1980s. Though the numbers of people attached to the task so far are small — Holder has announced a total of 55 attorneys and investigators to be assigned to the new working group — we will soon find out whether enough people will be assigned to confirm to Schneiderman that this is a serious effort.
If not, we can expect him and the other progressive AGs to walk. And that is Schneiderman’s other main source of leverage. In the jockeying for control, you might think that the odds overwhelmingly favor the insiders like Holder and Khazumi. But a high-profile criminal investigation that fizzled, with Schneiderman walking away, would be a massive political setback to the White House, more massive even than alienating some Wall Street campaign donors.
It would take a lot of guts for a Democratic attorney general to walk away from a presidentially created process in an election year. But if Schneiderman and the other progressive A.G.s conclude they are being rolled, they will walk and then do the best they can with the resources they have. [read]