ALBANY -- State Attorney General Eric T. Schneiderman said Wednesday that his Wall Street strategy was vindicated when JPMorgan Chase agreed to pay $13 billion to resolve federal and state claims regarding the selling of risky mortgage-backed securities, the housing bubble and the financial collapse of 2008.
Schneiderman and Delaware Attorney General Beau Biden gained national headlines two years ago when they resisted a proposed settlement with major American banks that would have given companies wide immunity from prosecution.
The holdout led President Barack Obama last year to name Schneiderman to co-chair the Residential Mortgage-Backed Securities Working Group, which filed a complaint against Bear Stearns -- by then a unit of JPMorgan Chase -- citing a broad pattern of misconduct in the packaging and selling of mortgage securities during the housing boom.
The settlement this week brought that claim to a close. "It's a vindication of the strategy I've been pursuing," Schneiderman said at a State Capitol news conference. "I had substantial pressure on me . . . to essentially give the banks a pass."
The agreement required JPMorgan to admit it misrepresented to investors that its mortgage loans met underwriting guidelines and that, in Schneiderman's words, "bundled toxic loans" contributed to the financial crisis.
New York will receive more than $1 billion of the $13 billion settlement. Schneiderman said $400 million will go to consumer programs such as offering refinancing at lower interest rates and new loans to low- and moderate-income families harmed by the financial crisis, and $613 million will be in cash -- with 15 percent ($92 million) going to the state's general fund. The cash will fund housing and land programs, he said.Schneiderman said he expects settlements with other big banks in the future.
One political consultant said the settlement was a political win for Schneiderman and virtually provides him with a ready-made TV ad for hisre-election campaign in 2014. Hank Sheinkopf said the attorney general can say he's the one who stood up to big banks.