The Obama administration is reportedly pressuring New York's new Attorney General Eric Schneiderman to go easy on the banks and engage in the "settlements in lieu of prosecutions" approach to financial crime that started with the Bush administration.
In an interview on Friday, Mr. Donovan defended his discussions with the attorney general, saying they were motivated by a desire to speed up help for troubled homeowners. But he said he had not spoken to bank officials or their representatives about trying to persuade Mr. Schneiderman to get on board with the deal.
“Eric and I agree on a tremendous amount here,” Mr. Donovan said. “The disagreement is around whether we should wait to settle and resolve the issues around the servicing practices for him — and potentially other A.G.’s and other federal agencies — to complete investigations on the securitization side. He might argue that he has more leverage that way, but our view is we have the immediate opportunity to help a huge number of borrowers to stay in their homes, to help their neighborhoods and the housing market.”
The Obama administration's approach to "helping troubled homeowners" has been catastrophically bad, and its deference to banks over the past few years has exacerbated the problem rather than ameliorated it.
Meanwhile, The Hill reports that deference plainly isn't good enough for some of Obama's former donors on Wall Street, who are defecting to Massachussetts Governor Mitt Romney. For understanding the administration's attitude towards Schneiderman however, this little fact buried in the piece might provide some insight:
A recent report from the Center for Responsive Politics found that Obama has leaned on Wall Street more than he did when he launched his first presidential bid. The report found that one-third of the money Obama raised for his reelection came from the financial sector.
So not only has Obama been deferential to the banks, but not so deferential that they're not backing his rivals. If he wins this time around, he'll be more beholden to them than he was the first time.