AG Schneiderman Promises Swift Action From New Financial Regulation Group

Tuesday, January 31, 2012

New York Attorney General Eric Schneiderman (L) speaks whille Attorney General Eric Holder listens during a news conference at the Justice Department on January 27, 2012 in Washington, DC. (Getty)

Recap from It's a Free Country.

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on the Brian Lehrer Show, Eric Schneiderman, New York State Attorney General and  co-chair of the Residential Mortgage-Backed Securities Working Group, talked about his appointment to co-chair the federal working group examining mortgage fraud.

Three critical areas

As co-chair of the new Residential Mortgage-Backed Securities Working Group, New York State Attorney General Eric Schneiderman is charged with expanding investigations into the lending and packaging of risky mortgages that precipitated the recent financial crisis. He said there were three critical areas that required the group's attention.

Civil liability, criminal conduct, and changing the laws to make sure this never happens again; those are three aspects of the relief I think we're going to be pursuing through this investigation.

'The same thing I was doing before'

Schneiderman said it was important to note that he doesn't give up any of his own jurisdiction by co-chairing the working group. He said he's pursuing the same cases that he was pursuing before, just with more resources and momentum behind him.

I'm doing the same thing I was doing before, I just have a lot of new leverage, allies, friends and resources. Having the jurisdiction of entities like the FBI, the IRS, and the Consumer Financial Protection Bureau, that just increases my ability to get the job done.

Swift action

Schneiderman cited a "variety of misconduct" in the financial sector, misconduct that has gone largely unpunished despite several regulatory pushes over the past few years. Some of that misconduct was legal, some of it wasn't, noted Schneiderman, but it's all been highlighted over the past year by changing political rhetoric and movements like Occupy Wall Street. Schneiderman promised those eagerly awaiting legal action against banks and executives that they wouldn't have long to wait.

You will see, the American people will see, action from this working group very quickly. A bunch of subpoenas have already gone out, cases will be filed. This is not something people are going to have to sit around for six months before they see results.


Eric Schneiderman

Comments [33]


Reader, you wrote: "the fall in rents in Boston that the article predicted at the time of writing-1997- did not occur."

This is what the article I posted said about Boston back in 1997:

"The aftermath has been encouraging to those who believe that rent control can be abolished without widespread disruption. Tenant activists had predicted huge rent increases, mass evictions, and a surge in the homeless population if the regulations were abandoned. None of this has occurred. Formerly regulated rents have risen, but construction of new apartments has also begun for the first time in 25 years." The price of anything will rise or fall depending upon the supply and demand for it.

Also, you wrote: "The rents did go up for all renters and there was a displacement of 40% of the Boston rental population." Although that is very possible, I would like to know where you got that 40% figure? It wasn't in the article that you recommended to me.

Jan. 31 2012 06:15 PM

Reader: I read the link you posted. My only response is that the author doesn't understand economics. He wrote: "none had apparently reviewed the full historical record of housing construction in New York City. New York's two greatest housing booms (during the 1920s and from 1947-1965) occurred when strict rent controls remained in effect for existing units." He's erroneously assuming that there's a corollary between those two phenomenon. Those housing booms took place during general economic booms, so of course there was an economic demand to build more housing. So long as someone thinks they can make enough money in a business that satisfies their subjective material wants (even if the profit is smaller because of a government price control), they will go into that business. If the government restricts (through price controls) the amount of money that someone can earn in a business or profession too much, after a while less and less people will be attracted to that business or profession if they can't make the amount of money they need to satisfy their material desires.

Do yourself the same favor that I did for myself over twenty years ago (and that, unfortunately, most people will never do): read up on some basic economics. Below are two links (one online, one pdf) to an excellent primer on the subject. If this primer doesn't change your mind (like it changed mine), then at least you will have an idea of how people like myself view economics.



Jan. 31 2012 05:10 PM

Renter You wrote: "it reflects a business point of view." Renting apartments is a business—and business operates under the laws of economics. By the way, I did not say that economics is not a "perfect" science, I said that it is not a natural science. (No science, whether natural or social, is perfect.)

Of course rents or any other prices that have been kept artificially low by force will rise to their natural market price when the force is removed. Living in a city like New York (or even the less expensive Boston) where there are many more people who want to live here than the available living space can accommodate will always mean that the cost of owning a home or renting an apartment will be more expensive here than less desirable cities such as Des Moines or Little Rock. Since many of the rent-controlled and rent-stabilized apartments in NYC are occupied by middle-class people like myself who could afford to pay more than they are now paying, there is no incentive for builders to build apartments that such people could move into since those people won't move. This keeps the supply of apartments low, thereby keeping the prices higher for those few apartments that are vacant. Remember: People go into a business because they want to earn a living. If there is not enough of a market to support that business, then they won't start it.

Jan. 31 2012 04:37 PM
Renter from East Village

I did read the article on the Cato website. Like Charles Koch, one of it's founders, it reflects a business point of view. And, as you said, economics is not a perfect science, the fall in rents in Boston that the article predicted at the time of writing-1997- did not occur. The rents did go up for all renters and there was a displacement of 40% of the Boston rental population.
Go to:

for a different opinion for the need of rent regulation in NYC then the Cato position.

Jan. 31 2012 04:05 PM

Renter from East Village, you wrote: "There is no basis to your comment in the case of housing in NYC." The basis of my comment is economics. I'm assuming from your comment that you did not bother to read the essay that I attached ( with my previous comment to you.

Economics, though not a natural science like physics, chemistry, and biology, is a social science. There are economic laws that exist whether or not you or anyone else is pleased with the results of those economic laws. Trying to force the price of anything, whether it be the price of a good, the price of an apartment (rent) or the price of labor (wage) lower or higher than the market is signaling the price should be will always create unintended consequences in the market for that good or service. If you want to ignore economic reality because you don't like the outcome, there is nothing I can do about it. I'm just letting you know that what you believe is helping some people is, in the long run, is hurting other people.

Jan. 31 2012 12:08 PM
Renter from East Village

David- There is no basis to your comment in the case of housing in NYC.
The 1947 NY Emergency Housing Act was enacted to stop landlords from gouging rents in an unregulated housing market in a shortage crisis. It was passed in Albany because Federal housing regulations were set to expire in 1948.There has never been a vacancy rate under 5% since the laws were enacted, the rate the law stipulates regulation ends. NYC's biggest residential building boom occurred during rent regulation. The average rent in Boston went from $700. to $1700. per month when rent control was ended. The affordable housing shortage there continues to keep rents high. The shortage of affordable housing is caused by a failure of political will at all levels of government to put human need before maximizing business profits.
If there was policy that encouraged affordable housing construction and prevented landlords warehousing regulated apartments to take them off the market, rents would be lower for all. Removing rent regulations will not create new affordable housing, just more expensive existing housing.

Jan. 31 2012 11:36 AM
Steve D from NJ

Does anyone happen to know about the company that, according to an article I read sometime in the last 6 months or so (possibly in The New Yorker) bought up tons of risky assets several years ago instead of selling them, with a devious deliberate plan to then later sell them after running up the price somehow, which the article said was the beginning of the real estate bust. I thought it was very interesting and very unreported, considering the main claim of the article that this co's actions had such great negative consequences. Sorry for being so vague, but I can't remember the name of the co or where I read the article and am trying to find both. Would really appreciate anyone's recollection of this! Thank you.

Jan. 31 2012 10:57 AM

Renter from East Village, you wrote: "The vacancy rate in NYC is around 2.5% a shortage that causes high unregulated rents." That's what happens in any market where there are government price controls that try to force market prices lower than what the market signals the prices should be:

Jan. 31 2012 10:54 AM
Elda from Queens

I'm glad the President is doing something to hold those banks accountable. There are too many people suffering by this housing problem.

Jan. 31 2012 10:54 AM
Ben Ho from Poughkeepsie, NY

A responsible economists takes offense.

As a Vassar college economics professor with MIT, Stanford, Cornell and the White House on my resume, I agree with the guest that there are a lot of things that politicians say that no responsible economist would agree with (like on cap and trade or taxes on savings) but on the two specific examples mentioned, Eric Schneiderman does economics a huge disservice by getting the economics exactly wrong. The economics profession is far from consensus on what caused the financial crisis and there are many responsible economists who do say Fannie and Freddie played a role. And on the comment about the effect of prosecution on the ability to get mortgages in the future, he gets the economic consensus almost exactly wrong.

Jan. 31 2012 10:49 AM
Nick Lake

Dear Brian,

Please reference the Front Line program "The Warning" which provides an excellent backdrop to this discussion going back to the late 1990's dealing with Greenspan, Rubin, Summners, and Geitner!

Jan. 31 2012 10:43 AM
Renter from East Village

The discussion of failed housing finance policy for home ownership always drifts toward write downs for mortgages and relief for home owners under threat of eviction.Obama and Cuomo both referred to this in their respective "state " speeches. Where is the relief for renters who are faced with a shortage of affordable rental apartments and inflated rents. The people evicted from foreclosed homes are increasing the demand for affordable rental apartments. NYC needs a change in housing policy in Albany to stop the loss of affordable housing. Cuomo should make an emergency executive order to freeze rents, freeze deregulation of rent stabilized and controlled apartments to stop the rise of homelessness in NYC. Landlords must be investigated for fraud in illegally deregulating apartments to market rate. The vacancy rate in NYC is around 2.5% a shortage that causes high unregulated rents. Also consider this- the US Supreme court may consider the constitutionality of NY rent Regulations.

Jan. 31 2012 10:42 AM

Schneiderman is a liar. He wants people to believe that Federal government policies had no part in creating the housing bubble. Here's an excellent book on the causes of the housing bubble. It's called "Meltdown."

(click the middle green "download" for a free pdf of the book)!download|80l34|240107477|Thomas_Woods_-_Meltdown.pdf|2825|R~E5FF52C9FDF5D2CD0390C8036759B2A1|0|0

Also, Schneiderman's comment about anyone saying that the government had a part in the housing crisis is like denying global warming is interesting considering this latest news on climate change:

Jan. 31 2012 10:36 AM

Here's hoping something substantial comes of this...and that it's not too late let alone too little...has taken way too long to get something like this running, especially in light of the Levin report from the Senate Finance Committee issued some time ago...

Jan. 31 2012 10:35 AM
Joni B from New York, NY

2004-2006 is the market trend where everyone was buying homes not because they could afford them but because everyone was buying homes, 2nd homes, vacation homes, largest homes etc.. It was the trend that was going on and everyone well almost everyone bought into it and bankers and brokers saw it as opportunity to make money and it was legal and now they have to be blamed for it, Eric is wrong, people bought interest only loans because they were the cheapest ones available not beacause they were sold into it just like people buy Apple products today because everyone has one and they are the best available even though they are Made in China under poor working conditions.

Jan. 31 2012 10:32 AM
greg murr from berlin/manhattan

Dear Mr. Schneiderman, in the interest of presenting yourself with legitimacy, please stop using "folks." I want your arguments (and those of President Obama, for that matter) to be taken seriously and this language smacks of disingenuousness.

Jan. 31 2012 10:32 AM
Carlos from 10011

The mention of Australia by Schneiderman is very telling. A Merrill Lynch
guy in Sydney told me how they were selling "this shit" to local councils
in Australia and that these councils thought that the stuff they were selling must be good because it's backed by Merrill. What the buyers didn't know was that as soon as Merrill had sold them they then resold to other banks. So Merrill were out and had collected their fees!

Jan. 31 2012 10:31 AM

People should not have bought houses they couldn't afford. "People are struggling every month to make their payments because ther mortage is more than what their home is worth"

That's not a sound arugument. Their payments have changed - if they could afford the payments when they bought it, they can still afford it even if the value has changed. There's always a risk is something loosing value after its been purchased. That doesn't mean the purchaser deserves a refund.

Jan. 31 2012 10:30 AM

fuva from Harlemworld:

Don't wast your typing on "gfq", his lobotomy hasn't quite healed, yet.

Jan. 31 2012 10:29 AM

"the government forced banks"
Forced???? Forced!!! I don't know much about govt, but I know that govt doesn't force banks to do anything. Please explain how anyone was "forced" to do anything. Republicans would NEVER allow that!

Jan. 31 2012 10:28 AM

If you call criticisms to freddie and fannie as a conservative fantasy then you need to rethink your idiotic logic. I was effing on the ground, buddy, it was and is a scam, and some of us were lucky and smart enough to make a few bucks. It's not even complicated!

And I am way more of a tree hugger than a right winger.

Jan. 31 2012 10:28 AM
james from manhattan

If this working group is looking into things that may have been "technically legal but maybe shouldn't have been," is there some kind of guarantee that the recommendations of this taxpayer paid investigraion will actually be followed unlike Simpson-Boles? And will the the report filed by Mr. Schneiderman at least, as a preamble, begin with a condemnation of the vast irresponsibility of individuals that took out mortgages that they could not afford and the main cause of the mortgage meltdown?

Jan. 31 2012 10:26 AM

Goldman Sachs $1,013,091
JPMorgan Chase & Co $808,799
Citigroup Inc $736,771

Jan. 31 2012 10:26 AM
Marilyn Jones from Clinton Corners NY

Housing market will never rebound till home owners do not fear taxing authority. At this time we are hostages to local and state tax boards and their arbitrary decisions

Jan. 31 2012 10:25 AM
fuva from Harlemworld

First, Obama is the best presidential candidate, but he can't be completely trusted on this. The financial industry is too embedded in his administration.

And, GARY, please stop repeating the canard that has been disproved several times, including on this very show.

• The vast majority of bad sub-prime mortgages were NOT to first-time home buyers. This is what the majority of FCIC members concluded, including the majority Republican members. Phil Angelides mentions this on Brian Lehrer on 11/9/11 or 1/18/12.

• The notion that this very powerful and influential industry could somehow be pressured into self-destructing suggests that the major players knowingly caused this catastrophe. But it appears that most of the industry did not know how risky their gambling was. Both scenarios point to de-/under-regulation – a major component of Republican ideology – as the more operative problem needing address.

Jan. 31 2012 10:25 AM

Too little, too late.

How can you investigate/prosecute your largest donors.

Goldman Sachs®, CitiBank™ and Chase® are all in the very top ten of Obama donors.

BO stinks!

Political??? NAW!!!

Jan. 31 2012 10:23 AM

Brian, this is unbelievable. The NYS AG, on your show just said that this 'new' task force is being activated not because of legal reasons but because the political climate has changed. And you did not even follow up! I just called in to your show and was told you would not be taking questions on this segment. What a surprise.

Jan. 31 2012 10:22 AM
Hicoachrich from Murray Hill

Why can't the banks re-cast 30 years to 50 years and have the math drop the monthly payment significantly---as one piece-- along with dropping the rates (and maybe not needing to drop the principal) to allow folks to pay. Paying off the mortgage is not the goal---allowing payments until the market comes back and houses can be sold again is the goal.

Jan. 31 2012 10:22 AM

The Fed is a huge art of the problem...and the community reinvestment act...good intentions gone haywire

Jan. 31 2012 10:20 AM

"Robosigning and things like that brought down the Economy..."

On the contrary -- robosigning and things like that WERE and ARE the Economy. Many folks were hoping to replace that fake economy -- where big banks are underwritten by Fannie and Freddie -- with a more honest and transparent one.

Lots of criminality took place, sure. But putting every last crook behind bars will do no more to fix what's wrong with our current Economy than throwing the TYCO CEO behind bars did for fixing the Economy back in 2000.

I hope that all your activity goes beyond chasing red herrings for a few satisfying headlines, as we saw back in the early 2000s.

Jan. 31 2012 10:17 AM
MichaelB from Morningside Heights

I agree with Michael from Manhattan about asking why it has taken so long for this effort to be proceeding... what happened to the earlier promises to take action (the formal notices of which I cannot cite, but have read that there WERE earlier promises to do so.)

Jan. 31 2012 10:15 AM
gary from queens

Eric, start by indicting Dodd and Frank and Andy Cuomo----who as HUD secretary sued banks that didn't write enough risky mortgages.

Let me see if I understand this: the government forced banks to put people in homes they couldnt afford, and now we're going to arrest bank loan managers for promoting mortgages to people who couldn't afford them?!

That's like praising kadaffy as a redeemed leader and new ally against jihadists, then 7 months later supporting islamist insurgents in his country to topple his regime.

i could have used as examples of hypocrisy and betrayal, Mubaric, or israel, or the UK, etc. But you get the point. Political expediency by this admin is disgusting

Jan. 31 2012 10:01 AM
Michael from Manhattan

I, like many others, I'm sure, are pleased that this is being done ~ and very pleased that Eric Schneiderman is running the show, but one must naturally ask the Obama administration WHY it's 2012 and you're just NOW getting around to this? And in the unlikely event that the Repubs win the White House this year, we know full well that this effort will be dismantled before they've even painted the Oval Office.

Jan. 31 2012 09:58 AM

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