The Obama administration has turned up the heat on Eric Schneiderman, New York's attorney general, to go along with a proposed settlement with the nation's largest banks over dubious foreclosure practices. Mr. Schneiderman should stand his ground in not supporting the deal. The administration says that a settlement would quickly deliver much needed relief to hard-pressed borrowers, but it's doubtful it would provide redress on a par with the banks' wrongdoing or borrowers' needs.
The deal has been in the works for nearly a year, after the state attorneys general announced an investigation into a robo-signing scandal in which banks were found to have filed false foreclosure papers in state courts. It was widely believed that the scandal would lead to a broad inquiry into how banks inflated the housing bubble, profiting as it expanded.
As it turned out, the inquiry was narrow. Mr. Schneiderman, who became the attorney general of New York after the scandal broke, has rightly refused to go along with a settlement that is not based on a thorough investigation, and has ordered investigations of his own. He has been supported by a handful of other state prosecutors, who say that the proposed deal would restrict their own investigations and prosecutions.
Shaun Donovan, the secretary of Housing and Urban Development, however, says that a settlement on the narrow issue of robo-signing would not preclude other investigations by individual attorneys general. But, clearly, once the robo-signing issue is off the table, investigators would lose leverage to pursue remedies for other possible illegalities in the packaging, marketing and transferring of mortgage securities.
It's a bad deal. Period. Kudos to Schneiderman for standing up and saying no.
