There is a lot to digest in a recent series of events on the Prosecuting Wall Street front, the two biggest being Obama's decision to make NYAG Eric Schneiderman the co-chair of a committee to investigate mortgage and securitization fraud, and the numerous rumors about an impending close to the foreclosure settlement saga.
Schneiderman's new role in investigating Mortgage Origination and Securitization Abuses will not cover the foreclosure settlement. When the public thinks about corruption in the housing markets on the part of the big banks, they mostly think of robosigning and mass-perjury issues, in the foreclosure settlement.
The securitization offenses were massive criminal conspiracies, identically undertaken by all of the big banks, to defraud investors in mortgage-backed securities. If you're looking for an appropriate target for a massive federal investigation, one that would get right to the heart of the corruption of the crisis this is it.
If they do a real clean sweep on securitization, the federal prisons would end up teeming with executives from the biggest banks. A lot of very big names would end up playing ping-pong and cards in Otisville and Englewood.
The question is, how real of an investigation will we get? The fact that Schneiderman's co-chairs are Lanny Breuer and Robert Khuzami are troubling. In an ideal world, both men would be targets of their own committee's investigation.
Before joining the SEC, Khuzami was senior counsel of the fixed-income desk at Deutsche Bank, which was creating exactly the sort of dicey CDOs that this investigation ought to be targeting.
Breuer, meanwhile, worked for the hotshot defense firm Covington & Burling, which among other things provided legal help that led to the creation of the electronic mortgage registry system MERS. These are the same skanks Holder and his prosecutor worked for.
The MERS issue is more critical to the foreclosure settlement, but the banks' joint efforts to evade the paper registry system are an element of the larger effort to defraud MBS investors. Mortgage securitization and the proliferation of CDOs and CDS could have taken place on anywhere near the scale that it did without MERS.
So having those two guys attached to Schneiderman's hip makes me wonder what is going on here. Khuzami's presence is especially odd. The theoretical reason we need a committee like this in the first place is because the federal agency that is supposed to be doing this work, the SEC and Justice Dept, have stubbornly refused to do their jobs.
excerpted from Matt Taibbi
