New York's attorney general, Eric Schneiderman is investigating a sweetheart deal being pushed by Bank of America to settle claims from the toxic mortgages they peddled to investors before the real estate bubble. It's understandable that he'd experience some pressure from the banks involved to just let it slide, but members of President Obama's administration are reportedly badgering Schneiderman to lie down and accept the terms.

What could be more galling than government officials pushing for settlement? New York Fed Board Member Kathryn Wylde accosting Schneiderman for his opposition to the settlement at Hugh Carey's funeral a few weeks ago. Wylde, who was appointed to the board to represent the public, told the Times that her conversation with Schneiderman was "not unpleasant."

In an interview, Wylde, who is President and CEO of the nonprofit Partnership for New York City said she merely told the AG that

it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street—love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

We're still trying to come up with plausible situations that are more "indefensible" than screwing up the economy by peddling toxic mortgages, foreclosing on the people you swindled with those toxic mortgages by forging court documents and using "robo-signers," and then attempting to prevent government attorneys from investigating, lest it happen again.

According to the Times, the secretary of Housing and Urban Development, Shaun Donovan, and "high-level Justice Department officials" are insisting that Schneiderman drop his opposition to the $8.5 billion settlement that would pay investors who were screwed by BOA's toxic mortgages 5 cents on the dollar, and would force them to waive any right to sue on the matter.

Donovan's reason for fervently supporting the settlement? "We have the immediate opportunity to help a huge number of borrowers to stay in their homes, to help their neighborhoods and the housing market," Donovan says. But a former Treasury employee and law professor has said, "The mortgage services have repeatedly promised to do things and then not done them." An attorney in Florida, the country's most foreclosure-ridden state, has said of the "assistance" promised to homeowners in the settlement: "It's like giving aspirin to someone with cancer."

We've reached out to Wylde and her fellow Class C boardmembers at the NY Fed, Columbia University President Lee Bollinger and Director of the Met Emily Rafferty to get their perspective on their duties as the public's representatives on the board.

[UPDATE] Danny Kanner, press secretary for Attorney General Schneiderman, tells us in a statement:

The Attorney General remains concerned by any settlement agreement that would fail to provide homeowners meaningful relief to stay in their homes, allow the housing market to begin to recover, and get our economy moving again. While our federal and state counterparts may be working toward the same goals, ongoing investigations by attorneys general cannot be shut down by efforts to settle quickly and those responsible must be held accountable.