Just when Wall Street banks thought they were was going to get off scot free, New York Attorney General Eric Schneiderman is launching an investigation into the very heart of fraudulent scheme that led to the financial crisis. This has the potential to be the “Mother of All Nightmares” for the banks, according to a Rolling Stone article by Matt Taibbi entitled “A New Wall Street Investigation: Is the Hammer Finally Coming Down?”
According to Taibbi, the investigation involves not only the securitization of mortgages by Bank of America, Goldman Sachs and Morgan Stanley, but the possible financing of a fraudulent scheme arising out of those banks lending huge sums of money to the likes of Countrywide so that it could fund the bad loans that the banks later securitized and sold as investment grade debt.
Taibbi writes: “Schneiderman’s investigation throws a monkey wrench into a global settlement of the banks’ activities. The banks cannot enter into a settlement with 49 states. They need all 50 at the table. But if Schneiderman breaks ranks and goes off on an end-run investigation that plunges right into the rotten core of the fraud era, then the whole pipe dream of an easy settlement vanishes in an instant. This is particularly true since Schneiderman is the most important AG, being from the state of New York, where most of the crime was probably committed.”
“Wall Street’s $1 trillion sales of these complex pools of mortgages and other loans lay at the heart of the financial crisis,” according to a Wall Street Journal article by Ruth Simon entitled “New York AG Probes Banks Over Mortgage Securities.”
Schneiderman is serious, according to Taibbi. So stay tuned and buckle your seatbelts.
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