NEW YORK (Reuters) - The New York attorney general's booting from a panel of state officials negotiating a settlement of mortgage abuses may shore up his political base and enforcement agenda.
Eric Schneiderman's resistance to a possible $25 billion settlement being negotiated with the largest mortgage servicers has already drawn praise from groups representing minorities and organized labor.
"Anybody who takes on the banks is a hero," political consultant Hank Sheinkopf said. "Whether he gets anything done is another story. In politics, it's not what you do, it's how you do it."
On Tuesday, Iowa Attorney General Tom Miller announced the removal of Schneiderman from the committee of state officials that has been working with federal agencies to address "robosigning" and other shortcuts that banks took in their haste to remove borrowers from their homes.
The states and the departments of Justice and Housing and Urban Development have been negotiating for months with Bank of America (BAC.N), JPMorgan Chase (JPM.N), Citigroup (C.N), Wells Fargo (WFC.N) and Ally Financial.
Miller said Schneiderman "actively worked to undermine" the state coalition. The New York Times has reported that federal officials pressured Schneiderman to drop his opposition.
The New York attorney general, a Democrat, has objected to any agreement that gives banks a broad release from claims by investors who bought securities backed by home loans that soured.
A spokesperson for Schneiderman said he is "committed to a comprehensive resolution that will provide homeowners meaningful relief to stay in their homes, allow the housing market to begin to recover, and get our economy moving again."
On Wednesday, a day after Miller announced his removal, Schneiderman won support for his stance from a variety of national and state organizations, including the National Association for the Advancement of Colored People, and the American Federation of Labor-Congress of Industrial Organizations.
In a letter to government officials leading the mortgage investigation, including Miller, they said the group should not be pressured into a deal that does not adequately address the harm done.
"We understand that industry is pressuring to limit relief and for overly broad releases; they must not be allowed to succeed," they said. "To the extent that institutions or individuals committed illegal acts, there have to be consequences for breaking the law that are in proportion to the seriousness of the violations."
OBSTRUCTIONIST? "BEYOND FRIVOLOUS"
Some government officials would prefer to have a deal soon that could provide relief to homeowners and stabilize the housing market.
But the public may not view Schneiderman as an obstructionist.
"Most of the people aren't going to see it that way," said Sheinkopf. "They're going to see it as 'good guy takes on big banks'."
Schneiderman took office in January and is up for re-election in November 2014.
Eliot Spitzer, a former New York attorney general known for his successes in fighting Wall Street, said it is "beyond frivolous" to suggest that Schneiderman is causing delays.
Spitzer blamed the federal government for years of lax regulation, and not driving a harder bargain with banks.
"They have given the banks everything they wanted and gotten nothing back," he said. "Eric Schneiderman is properly demanding negotiating position and requiring the banks to disclose more, to leave them open to inquiries related to areas that have not been sufficiently investigated before signing onto a broad waiver."
New York had last October been named to join an executive committee leading the state coalition.
Miller said he invited Schneiderman's office in June to be part of a smaller negotiating committee, but Schneiderman declined, indicating he "would possibly pursue a different direction."
Josh Rosner, an independent financial services consultant at Graham Fisher & Co, said Schneiderman's being dropped from the committee may have little impact.
"To have a 50-state settlement, Schneiderman's concerns are going to have to be addressed," he said.
(Reporting by Andrew Longstreth; Editing by Tim Dobbyn)