The Attorney General of New York state has opened an investigation into the practice of mortgage loan packaging by the big banks and investment firms like Bank of America, Morgan Stanley, and Goldman Sachs. It was these practices that led to the real estate bubble and subsequent collapse.

This is a hopeful sign since we cannot expect the Obama administration’s justice department to take any serious action since the White House has long been a wholly owned subsidiary of Wall Street.

Matt Taibbi, who has been relentless in driving this story forward, is cautiously hopeful that something meaningful might come out of this.

This investigation has the potential to be a Mother of All Nightmares situation for the banks for a couple of reasons. For one thing, the decision to go after the securitization process is a total prosecutorial bullseye. This is the ugly heart of the wide-scale fraud scheme of the bubble era.
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The reason this is such a potentially deadly investigation for the banks is that they seemed to be so close to getting away scot free. There is another investigation into the banks’ mortgage abuses by the states’ Attorneys General, led by Iowa AG Tom Miller, that was rumored to be headed toward a settlement, despite the fact that nothing like a complete investigation has been done.
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Such a desire to get some kind of deal done and sweep the mortgage mess under the rug once and for all seems almost universal among high-ranking politicians, and particularly in the Obama administration, which has acted throughout like it wants more than anything to simply get all of this over with and put in the past.

I am going to wait and see how this turns out. The oligarchy is going to close ranks and pull out all the stops to defend itself and preserve its privileges and get away with a plea deal that involves just a slap on the wrist and fine.