Delaware’s Attorney General Beau Biden is leading calls for renewed investigation and prosecution of giant US banks for their role in the home foreclosure mess.
But Delaware’s Governor Jack Markell, worried about thousands of bank jobs in Wilmington, wants to settle the "controversies" quickly so banks start lending again (and hiring his voters in recession-wracked Delaware).
Both are Democrats. The Attorney General is the son of former US Sen., now Vice President, Joe Biden. The senator's role in shaping US banking policy includes his crucial support for the GOP- and credit card bank-backed US bankruptcy reform law of 2004 - which ended up boosting foreclosures, according to this report by a Federal Reserve Bank of Philadelphia scholar. 
In this brief statement, the younger Biden objected to the marginalization by other state law enforcement officers of New York AG Eric Schneiderman as talks with Bank of America, JPMorgan and other lenders on how they mishandled hundreds of thousands of home loan foreclosures and sales of risky loans to bond investors approached a climax.
"Schneiderman has and continues to raise important and legitimate concerns about the scope of the releases being demanded by the banks as part of the multistate settlement," and Biden supports him, he wrote. "The events leading up to the mortgage crisis must be fully investigated, including origination and securitization practices, before any broad immunity is granted -- the American people deserve an investigation," implying that other state AGs are sweeping the matter under the rug.
Markell's letter, to the National Association of State Attorneys General, takes the opposite approach. He blames the "increasingly scattershot approach of states’ attorneys general and other government agencies to investigate" the home foreclosure and mortgage-backed securities messes for "prolong(ing) an economic climate that has left millions of Americans jobless."
Markell says he supports the Obama administrations' efforts to settle the mortgage "controversies" quickly. "Critics can always argue that more could be done." But the government shouldn't be taking sides with "well financed" investors, in particular, against the banks at this point, Markell adds.
"As the governor of a financial center state, I am sure some will say that I am taking these positions because the financial services sector is an important part of Delaware’s economy," and that's true as far as it goes, Markell goes on. "But this issue is bigger than Delaware... To get our nation’s economy moving again, we need a strong and vibrant financial services industry," without the threat of endless litigation over how people who used to run banks may or may not have wrecked them.

JPMorgan Chase & Co. employs 5,800 at its Delaware credit card headquarters, says spokesman Paul Hardwick. MBNA successor Bank of America Corp., which is considering massive layoffs, is an even larger Wilmington employer.

The governor and the (separately elected) attorney general, both Democrats, "do appear to have a different perspective on this," Markell spokesman Brian Selander told me. 

Biden sent this statement:
 
"My job is to protect homeowners, investors and all Delawareans affected by the abuses of the mortgage industry that created this economic crisis.  I do not settle matters that have not been investigated, and there remains a lot of work to be done in understanding the scope of the mortgage industry's bad conduct that has hurt so many.  Our economy works the best when everyone plays by the rules, and we must hold those who brought our financial system to the brink of collapse to account."

Markell's letter puts him in line with past leaders of Delaware dominant Democrats, including Sen. (and ex-Gov.) Tom Carper, as well as ex-Sen. Joe Biden, Beau's dad, in defending bank interests. Young Biden's tougher, pro-investor or pro-consumer stand recalls that of his father's old chief of staff, Ted Kaufman, when he briefly held Joe Biden's old Senate seat in 2008-09. 
Sen. Biden's contribution to US bank law includes ensuring bipartisan support and passage, after a long struggle, for the 2004 Bankruptcy Reform Act, demanded by his credit card constituents, led by Charles Cawley and Bruce Hammonds of MBNA (now part of Bank of America). Biden at the time said he only supported the bill after banks added consumer protections at his insistence.
But that measure seems to have fed the foreclosure crisis by making it tougher for homeowners to use bankruptcy to keep their homes after wracking up unpayable credit card debt, Wenli Li of the Federal Reserve Bank of Philadelphia and two colleagues found in this 2009 research report. Excerpts:
"Bankruptcy reform caused mortgage default rates to rise... Debtors’ cost of filing increased sharply after the reform. Also the homestead exemption in bankruptcy was capped at $125,000, thus making it impossible for homeowners with high home equity to keep their homes in bankruptcy. A new 'means test' increased higher-income debtors’ obligation to repay their unsecured debt in bankruptcy.

"Because these changes reduced homeowners’ gain from filing for bankruptcy, they reduce default rates on unsecured debt. And because homeowners’ ability-to-pay is fixed in the short-run, these changes are predicted to increase default rates on mortgages." Indeed, Li and colleagues found the Biden-backed bankruptcy reform, by 2005, had increased home loan default rates "50% for prime mortgages and 7% for subprime mortgages," and a lot more for subprime mortgages over $125,000.

In championing his home-state credit card business, Sen. Joe Biden ended up feeding the home foreclosure crisis. Now AG Beau Biden is demanding state investigators get to the bottom of the mortgage mess. But Gov. Jack Markell has moved into Biden's father's old shoes, defending the banking industry in hopes of boosting Delaware jobs.