PhillyDeals: In Del., a tough and easy way against banks

Down I-95 in Delaware, Attorney General Beau Biden wants government agents to take tougher action against the big U.S. banks for their role in the collapse of the home finance market and the foreclosure crisis.

But Gov. Jack Markell wants a quicker, easier final settlement with the banks, in hopes the national lenders, whose towers dominate Wilmington, will start making loans and hiring again.

Both are Democrats.

The attorney general is the son of former U.S. senator, now vice president, Joe Biden, a longtime banking-industry ally who considers himself pro-consumer - though he also played a key role in passing a law that accelerated the foreclosure crisis.

Young Biden last month sided with New York State Attorney General Eric Schneiderman in demanding a longer probe of how the banks made, sold, and foreclosed on hundreds of thousands of bad loans, that would leave bank investors and critics still free to sue the banks.

"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," Biden wrote, as if others in government are sweeping the matter under the rug.

"My job is to protect homeowners, investors, and all Delawareans affected by the abuses of the mortgage industry that created this economic crisis," Biden said in a statement. "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."

Markell, by contrast, in a letter to the National Association of State Attorneys General, blamed the "increasingly scattershot approach" of government investigations into the mortgage business for "prolong[ing] an economic climate that has left millions of Americans" unemployed.

"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," Markell added. "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 endless legal war.

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

JPMorgan Chase & Co. employs 5,800 at its Delaware credit-card headquarters, about the same as before the credit crisis, said spokesman Paul Hardwick.

Bank of America Corp., which rivals Chase as the biggest Visa-MasterCard issuer, used to be larger than that, but it has cut thousands since 2007.

Markell is in line with past leaders of Delaware's dominant Democrats, including Sen. Tom Carper, as well as Joe Biden, who have mostly joined Republicans in defending banks since a bipartisan 1980 state law cut bank taxes and limits, attracting thousands of bank jobs to Wilmington.

Young Biden's tougher talk sounds more like his father's onetime chief of staff, Ted Kaufman, who demanded the government break up the giant banks when he briefly held Joe Biden's old Senate seat in 2008-09.

Then-Sen. Biden's contribution to bank law includes securing Democratic support and passage for the Republican-backed 2004 Bankruptcy Reform Act, demanded by his credit-card constituents.

That law made it tougher for Americans to use bankruptcy to keep their homes after racking up unpayable credit-card debt. One result: a surge in home foreclosures. Wenli Li, an economist with the Federal Reserve Bank of Philadelphia, and two colleagues wrote in a 2009 study: "Bankruptcy reform caused mortgage default rates to rise" by 50 percent for overextended prime-mortgage borrowers.

Now A.G. Biden is demanding state investigators probe more deeply into the foreclosure mess. And Gov. Markell has moved into Biden's father's old role, conciliating the banks, and hoping they'll hire more voters.