Hat tip to Kingside for sending this along, from the WaPo:

Iowa Attorney General Tom Miller, who is leading foreclosure settlement negotiations with the nation’s largest banks on behalf of all 50 states, abruptly removed New York Attorney General Eric Schneiderman from the coalition’s executive committee Tuesday, saying he had “actively worked to undermine” the group’s efforts in recent months.

Miller did not speak with Schneiderman before he sent word about the decision. Rather, Iowa assistant Attorney General Patrick Madigan e-mailed counterparts around the country just before 1 p.m. announcing that New York had been booted from the key group of states overseeing the negotiations, “effective immediately.”

Despite the move, New York could still support whatever deal emerges. At the same time, it makes the path more difficult for Miller and others if they are forced to move forward without one of the most influential states, not to mention one hit hard by the foreclosure crisis and home to many of the financial firms under scrutiny. The absence of New York also could diminish the size of any settlement.

Miller’s decision underscores tensions that have boiled over as officials try to finalize the multibillion-dollar deal with the banks whose widespread mortgage servicing problems — from appalling customer service to hundreds of thousands of “robosigned” documents — sparked national outrage last fall.

A central issue is how broad a release from future legal claims banks should receive in exchange for agreeing to overhaul their mortgage servicing practices and paying tens of billions of dollars in penalties.

Schneiderman, who has undertaken investigations into the way banks bundled and sold pools of mortgages, known as securitization, has said any settlement should not release banks from liability for all their mortgage-related sins committed before the financial crisis. Attorneys general from several other states, including Delaware, Nevada and Massachusetts, have expressed similar concerns.

Inherent in Schneiderman’s warnings was an implication that officials negotiating the current deal are willing to give away too much, a suggestion that those involved in the talks describe as inaccurate and infuriating. Several people familiar with the talks said those at the negotiating table have never considered granting banks immunity from claims related to the securitization process, nor have they sought to prevent Schneiderman and others from pursuing broader investigations into other issues, such as securitization, fair housing claims and criminal fraud.

“This investigation has been about robosigning and loan modifications for homeowners, so the release in the settlement should mirror that; it should be a narrow release,” said Illinois Attorney General Lisa Madigan (no relation to Iowa’s Madigan). “It was never intended to serve as a settlement for all the violations that the nation’s banks have engaged in.”

Schneiderman has insisted that too hasty a settlement could let banks off too easily. He wants a more comprehensive investigation into all aspects of the mortgage crisis, followed by a larger settlement that would bring relief both to struggling homeowners and large institutional investors who bought mortgage-backed securities that turned out to be worthless.

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