Persistent Attempts To Punish Bankers Who Provoked The Great Recession

Eric Schneiderman, attorney general for New York, speaks at a news conference in Buffalo, New York, U.S., on Tuesday, June 4, 2013. 

Eric Schneiderman is still seeking justice for the financial crisis

By Katrina vanden Heuvel  October 7, 2014

After six years in office, departing Attorney General Eric Holder will leave behind a strong legacy of defending civil rights. As the first black American to lead the Justice Department, Holder fought to stop voter suppression, to change unfair sentencing policies, and — by refusing to defend the Defense of Marriage Act — to end discrimination against LGBT couples. Holder’s resignation announcement last month, understandably, has prompted a wave of speculation about who will replace him. That’s an important conversation, but we should be paying equal attention to the states, where attorneys general are elected and have significant influence over the application of the law.

For instance, while progressives were rightly disappointed by Holder’s failure to punish Wall Street for financial crimes leading up to the economic crisis, New York Attorney General Eric Schneiderman has been almost single-handedly fighting an uphill battle to hold the banks accountable. Now running for reelection, Schneiderman has devoted much of the past four years to delivering some measure of justice to millions of Americans, in New York and across the country, who suffered as a result of Wall Street’s destructive behavior.

Upon taking office in 2011, Schneiderman took a principled stand in the negotiations between 50 state attorneys general and the banks over their illegal use of “robo-signing,” a loathsome practice that accelerated the foreclosure process by falsifying signatures on paperwork that bank employees had not read. With the parties nearing a settlement that would have cost the banks a paltry $20 billion, Schneiderman refused to give his consent to any deal that released the banks from liability for their misdeeds prior to the 2008 crash. Resisting pressure from his fellow attorneys general and the Obama administration, Schneiderman held firm, while also demanding a sweeping investigation of the banks’ actions. “I said you can’t release the banks from claims that haven’t been investigated,” he later explained.

Schneiderman’s efforts paid off; in the 2012 State of the Union Address, President Obama announced the creation of a new task force, co-chaired by Schneiderman, charged with investigating Wall Street for unlawful activities that contributed to the housing crisis. Under Schneiderman’s leadership, the Residential Mortgage Backed Securities Working Group has secured billions in relief for homeowners, including a record-breaking $16.65 billion settlement with Bank of America in August. He also fought to ensure that money from a previous settlement with JPMorgan Chase would be used to assist New York homeowners, instead of filling the state’s coffers. Beyond his pursuit of justice in the financial sector, Schneiderman has been committed to protecting the rights of working New Yorkers, most notably by fighting to compensate fast-food and car wash employees who were victims of wage theft.

Despite these successes, some critics on the left remain disappointed — justifiably so — about the lack of criminal cases against Wall Street officials. For his part, Schneiderman is not satisfied, either. “I’ve seen evidence that indicates that criminal cases might have been brought if some investigations had begun earlier than they did,” he told me in a recent interview. He also kept the door open to future prosecutions, saying, “There has been no release of any criminal liability. None of the civil settlements negotiated by the working group I co-chaired have released any individual or institution from criminal liability.”

If he is reelected, Schneiderman will have an opportunity to build on the accomplishments of his first term. But what he has already done serves as a reminder of the importance of statewide elections — the impact of which can also be seen in places like Ohio, for example, where a Republican attorney general and secretary of state just successfully fought to restrict early voting. And what he has not yet achieved serves as a reminder that it’s not enough to elect the right people; we also have to build a movement that applies genuine pressure on political leaders to advance our long-term goals.

Nobody knows this better than Schneiderman, who has called for a commitment to “transformational politics,” which he defines as “the work we do today to ensure that the deal we can get . . . in a year — or five years, or twenty years — will be better than the deal we can get today.” As he wrote in The Nation in 2008, “History teaches that the overwhelming majority of elected officials follow movement builders outside government when it comes to the new and risky. . . . Once you recognize it, demand it and reward it, it will happen.”

Read more from Katrina vanden Heuvel’s archive

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Banks face another round of charges. "With evidence mounting that a number of foreign and American banks colluded to alter the price of foreign currencies, the largest and least regulated financial market, prosecutors are aiming to file charges against at least one bank by the end of the year, according to interviews with lawyers briefed on the matter. Ultimately, several banks are expected to plead guilty....While cases stemming from the financial crisis were aimed at institutions, prosecutors are planning to eventually indict individual bank employees over currency manipulation, using their instant messages as incriminating evidence. The charges will most likely focus on traders and their bosses rather than chief executives." Ben Protess and Jessica Silver-Greenberg in The New York Times.