August 20, 2015 12:02PM

“A Fundamental Lack of Faith That Our Legal System Is Working Properly”

I've got a new piece in City Journal analyzing the record of New York's powerful, very left-wing Attorney General Eric Schneiderman. It ranges over topics that include his close ties to labor unions, his campaigns against AirBnB, Craigslist sellers, and herbal-supplement retailers, his role in overturning already-negotiated mortgage and banking settlements, and much more, including the unique role of state AGs in American politics. Very few businesses can resist the pressure a New York attorney general can bring to bear on them, with the sorts of troublesome results I explain in a sidebar

When New York attorney general Eric Schneiderman filed charges of unlawful redlining against two banks in the Rochester and Buffalo areas — they had concentrated their lending in the suburbs — he drew an unusual rebuke from Frank H. Hamlin III, CEO of another small upstate bank, Canandaigua National Bank and Trust, which had not been charged. In a letter to shareholders, Hamlin reassured them that his own bank’s relations with its regulators “are healthy. I am, however, extremely suspicious of the arbitrary and capricious manner in which various agencies (prosecutors) are abusing the legal system in order to further their own political and economic interests.” And he noted a foundational problem: “The regulations are vague in explaining what conduct is actually prohibited.” That gives enforcers plenty of discretion as to when to file complaints and against whom.

Hamlin went on to explain that one of the two banks that Schneiderman targeted “has chosen to merely fold while the other has chosen to fight. I can understand the decision to fold. The potential sanctions are severe on both corporate and personal fronts. One must decide whether to put the livelihood of their employees and potentially their own personal liberty on the line or merely cry ‘uncle’ and give the ‘people’ its pound of flesh and go on with life.

“Those who choose to fight are forced to depend upon a legal system that has mutated its focus from time-honored legal principle and justice to efficiency and political expediency,” he wrote. “I can assure you, there is no such thing as ‘efficient justice.’ ”

Finally, Hamlin warned against assuming that any decision to fold was an indicator of ultimate guilt. “The reason that 98 percent of prosecutions are settled instead of taken to trial is not the result of defendants saying, ‘Aw shucks, you caught me.’ It has to do with a fundamental and reasonable lack of faith that our legal system is working properly.”

When the letter began to attract press notice, the bank declined further comment, saying that the letter spoke for itself. Speaking out is all well and good, but in New York, it’s important not to rile up the authorities by doing so too loudly.

Read the whole thing here.