The Schneiderman Show
|I've got my eye on you!
Well, we woke up Monday morning to news that the Attorney General for the State of New York (AG) is initiating legal action against Bank of America and Wells Fargo for allegedly breaching the terms of the $26 billion National Mortgage Settlement. The focus of the legal action are the settlement's 304 servicing standards, the mortgage servicing rules designed to improve customer service and make it easier for homeowners to seek loan modifications. The press release from the AG's office claims that it has documented hundreds of cases of homeowners put at risk by the banks' violations of the national settlement terms. The AG is seeking injunctive relief and strict compliance with the terms of the national settlement.
Most people have heard the old saw that AG stands for "Aspiring Governor" and this effort seems to be a page torn from the Eliot Spitzer and Andrew Cuomo playbooks. What's a little galling about this stunt, is that the national settlement included the establishment of a Mortgage Settlement Oversight Board and a settlement monitor, the Office of Mortgage Settlement Oversight. It is headed by Joe Smith, former North Carolina Commissioner of Banks. Joe Smith is a highly respected veteran regulator with a well-deserved reputation as an honest broker.
Why didn't the New York AG work through the oversight process that was already set up? Instead the AG chose to do an end run and go gunning for bankers by himself. This is only understandable in a base political context.
Interestingly, this comes on the heels of another New York State-sponsored attack on bankers by Benjamin Lawsky, the Superintendent of Financial Services for the State of New York, in the matter of Standard Chartered Bank (a British bank). Specifically, extracting a $340 million dollar penalty for anti-money laundering deficiencies. All much to the chagrin of his Federal counterparts, who expected the state bank regulator to remain in the Land of the Lotus-eaters suckling on a seemingly endless investigation.
I was surprised at the Lawsky action at the time and applauded it. After a career in bank regulation, including a period as Director for International Banking and Finance at the OCC, I sensed a higher-bar was in existence when it came to pursuing actions against banks that hailed from developed countries versus banks from emerging economies. Maybe it is the Basel Committee common bond among developed-country regulators - like poker buddies or a bromance. Banks from the developed countries seemed to be held to English common law standards (innocent until proven guilty), while we figuratively hauled out Napoleonic Code standards (guilty until proven innocent) for banks from emerging market countries.
Are we witnessing an artillery exchange between Schneiderman and another potential gubernatorial hopeful, Benjamin Lawsky, using mega-bankers as their cannon fodder? Six years after the financial crisis began, the mega-bankers are a pitiful lot and easy pickings, what with their bruises, black-eyes, tousled coiffures, and rumpled Brooks Brothers suits. This sad collection, after a hard day of abuse at the office, takes scant comfort at night, between sobs, only in the fact that politicians have lower approval ratings than our Captains of Finance.