Obama Administration Pressures Prosecutors To Drop Criminal Investigations Of Banks Over Mortgage Fraud

The last few years have been replete with stories of fraudulent and possibly criminal acts for banks in the mortgage crisis. Thousands have lost their homes and faced financial ruin. The Administration is yielding to demands from lobbyists for the banks and particularly targeting Eric T. Schneiderman, the attorney general of New York, in demanding support for a deal that would offer just civil fines rather than criminal penalties.

Various organizations have denounced the actions of the Obama Administration as caving into this powerful lobby — as it has caved into the oil/gas lobby on offshore drilling, pharmaceutical lobby on health care legislation, and telecom lobby on immunity from privacy lawsuits.

Schneiderman and other state prosecutors want to hold bank officials liable for the harm that they have caused. They believe there are strong cases for criminal prosecution. Shaun Donovan, the secretary of Housing and Urban Development, and various other Administration officials have been pressuring the states to give the industry a pass on any crimes. Bank officials are known to have contacted Donovan and other Administration officials to pressure prosecutors. The industry (and the Obama Administration) wants to force attorneys general to grant waivers from criminal liability in exchange for civil fines.

Among other possible cases, Schneiderman objects to giving a pass to New York Mellon and Bank of America that would cover 530 mortgage-backed securities containing allegedly fraudulent Countrywide Financial loans.

Source: NYT