Stuart: The man Wall Street banks fear the most

In New York, the government and Wall Street continue to argue and fight. Faced with the 200-year-old question of more oversight and regulation or more freedom and deregulation, Wall Street, which survived the 2008 financial crisis, has lost its nerve. What's more, Obama has sent a tough guy to New York in the form of Scott Schroeder.

As for the Occupy Wall Street movement, Mr. Shuld said, "All Americans are now saying, 'We need to explain that there must be equality before the law, no exceptions, no exceptions.'"

The Wall Street financial fraud scandal

In the United States, a home loan is a loan made by a buyer using a home as collateral. The owner is in foreclosure, and when the loan is paid off, the house is in foreclosure. But if the homeowner doesn't make a pre-foreclosure payment for more than three months, the person under foreclosure (such as the bank) will start a foreclosure process that is affordable to the homeowner. The typical foreclosure process consists of three stages. In the first phase, the bank will notify the homeowner to pay up. In the second stage, the bank would seize the house and sell it at auction. If the house is not sold at public auction, it enters the third stage and becomes real property owned by the bank.

In 2009 judges in one Florida county heard nearly 1, 000 foreclosure cases a day.

And in a huge number of cases, the banks "played a very bad role". A few months ago it emerged that five banks, Bank of America, Citibank, jpmorgan Chase, Wells Fargo and Ally Financial, had foreclosed on tens of millions of homeowners without predicting their ability to repay or modifying their mortgages. Instead, it recruited more senior staff to help it sign foreclosure papers. The banks filed numerous fraudulent foreclosure documents in New York state and federal courts.

The banks' actions are fueling a wave of home foreclosures that will deal a fresh blow to more families, communities and a still-fragile economy.

All the time, Wall Street banks created countless mortgages and bundled them into securities markets; They claim to guarantee investors' rights, but when things go wrong, they squeeze their profits and sometimes gamble with them.

Who's going to investigate Wall Street

In February 2011, less than a month after taking over as New York's attorney-general, Eric Schneiderman and his colleagues began examining negotiations between state attorneys-general and the Obama administration with five major national agencies.

As the only legal executive with jurisdiction over Wall Street, Shuld was appointed and consulted with the banks. But his aides say there has been little progress in talks with the banks so far, and that without documentation and checks, penalties against the banks are unlikely to materialize.

Schud was not discouraged. He worked in the public interest and was the Democratic leader of the New York State Senate for 12 years. Twelve years ago, he was already a successful Wall Street prosecutor, bringing complex fraud cases against banks and exchanges.

In fact, he has pure Wall Street blood. Schuld's father, Owen Schuld, was an adviser to Drexel Burnham in the 1980s, when he helped Mike Meegan deal with bad debts.

Mr. Shuld, 57, has jurisdiction over all of Wall Street. The Martin Act, passed in 1921, gave the state's attorney general the power to investigate and prosecute any financial fraud. During the investigation, the attorney general could investigate any documents and individuals, and could bring civil and criminal charges against banks at any time.

After a brief conversation with the bank, Shuld went to Washington for the first meeting of the National Association of Attorneys General. At the meeting, Shuld proposed an investigation of the banks, whose practices led directly to the 2008 subprime mortgage crisis, "without an investigation, the banks will get away with murder." He knew that if the banks could not be investigated, they would not be punished, and the government was running out of options.

When Shuld returned to New York, he spoke to 21 prosecutors and asked them to start looking at the bank's history.

Shuld knew that his proposed solution would prevent banks from being exempted from the mortgage scandal and hold them accountable for their actions before the economic crisis. He called for the creation of a joint task force that would include state attorneys general, federal district attorneys and federal agencies such as the Justice Department, the CIA, the Internal Revenue Service and the Securities and Exchange Commission.

Bring the banks to justice

The Justice Department's previous plan, he said, was premature and needed public influence to move forward. Six months later, Schroeder won support. In one of his speeches, Mr. Obama announced the creation of a task force on residential mortgage securities to investigate banks, named Mr. Shuld as a co-head of the task force, and made clear that banks would not be exempted from securitizing mortgages.

On February 4th Mr Shuld filed suit against the three banks. Then a new task force came up with a plan for banks to spend $26 billion, rather than the previous $20 billion, to appease aggrieved homeowners. On February 10th the Fed forced the five banks to pay $767m to settle foreclosures with victims. The moves mark an early victory in a year-long federal and state investigation into bank abuses in the foreclosure process, helping more than a million homeowners.

However, the investigation work of the working group is still progressing in an orderly manner. While we don't know what else they will reveal about Wall Street, we can be sure they will accomplish four things: A sustained investigation of Wall Street misconduct could provide an authoritative audit of the financial institutions that dragged the nation into economic hell, as the Pecora Investigation did during the Great Depression of the 1930s, and set the stage for subsequent financial reform; They could impose penalties that are much harsher than $26 billion and hand that money over to homeowners and investors, allowing the housing market and the economy to fully recover and they could Sue some of the bank executives; If banks lack self-discipline, they may allow some to be restructured -- as is possible if destroying a bank can be replaced by a sounder, fairer financial system.

As for the Occupy Wall Street movement, Mr. Shuld said, "All Americans are now saying, 'We need to explain that there must be equality before the law, no exceptions, no exceptions.'" As a result, Schroeder's call for an investigation of the banks is increasingly echoed in the federal government. 'The massive Occupy movement is sending a message that we have to bring the banks to justice,' Mr. Shuld said.