|New York Attorney General Eric Schneiderman|
NEW YORK ( TheStreet) -- New York Attorney General Eric Schneiderman is taking his first crack at Wall Street, showing the difficulty banks face as they try to negotiate a broad settlement over mortgage-related issues. Schneiderman is investigating Morgan Stanley ( MS), Goldman Sachs ( GS) and Bank of America ( BAC), in an related to mortgage securitization practices, The New York Times reported late Monday.
Schneiderman predecessors as New York attorney general, Elliott Spitzer and Andrew Cuomo, showed that being tough on Wall Street can be an effective way to earn credibility and name recognition, while jumpstarting a political career. "Eric is just making his name; if you look at the polls, the banks are probably in last place of any industry and people were very suspicious of the bailout and suspicious of the activities of the banks," says George Arzt, a New York political consultant who has provided some support to Schneiderman in the past. "This is a very good move for any investigatory agency that has to get elected." Schneiderman, a former State Senator, does not fit the mold of his predecessors, being more interested in issues of social justice than bringing in a big trophy in the form of a Wall Street boss. "Many of your contemporary social justice issues can only be expressed or realized through legislation. Its not that easy to enforce your preferences for--whether its same sex marriage or affirmative action--through litigation, because courts have become increasingly conservative about the ability of a judiciary to impose social values," says John Coffee, professor at Columbia University law school. As a result, Schneiderman cannot afford to take his eye off the ball in his current role, Coffee says. "It's important for him to show that he's carrying on the momentum established by Spitzer and Cuomo and that he is going to be a successor to them rather than a quiet passive figure only interested in social justice," Coffee says. That could be a problem for banks, which, according to The New York Times' report, are trying to reach broad blanket settlement with all major U.S. regulators over mortgage-related issues, including attorneys general in all 50 states. While regulators have shown some coordination with regard to foreclosure issues, especially robosigning, that is a long way from suggesting they could agree to a broad settlement on all mortgage matters, especially as new ones could come to light. "There is broad disagreement among the attorneys general with regard to approaches to what has happened here in the mortgage space," says Gary Townsend, portfolio manager at Hill-Townsend Capital. -- Written by Dan Freed in New York.