It has been a fascinating last few weeks in the great banking/housing debates. The administration is growing less and less tentative in its rhetoric against Wall Street, and is opening up multiple new fronts to take on the black hole of the housing market that is throwing a wet blanket over the broader economy. New York Attorney General Eric Schneiderman has been pounding on the doors of the Department of Justice, demanding they work with him and give him more resources to do the aggressive prosecution he wants to do, and they have relented to an extent. But we still don’t know how aggressive the new task force they set up will be. The long rumored robo-signing settlement, which has been a few days away from being inked for about a year now, seems like it is moving toward completion, but Nevada Attorney General Catherine Cortez Masto sent a letter with 38 specific questions that trouble a lot of people. And progressives who have been working on banking issues for years are debating whether to have any faith at all in the developments of the week.

I am going to focus on the settlement and Attorney General Masto’s letter, because the rumors and counter-rumors, arguments and counter-arguments, are dizzying. I should stipulate that I am not a lawyer, and have seen none of the actual language of the settlement, so all I’ve got to work with are lots of conversations, blog posts, news reports, and Masto’s letter. Since the settlement talks began more than a year ago, I have had a ton of conversations with AG Tom Miller of Iowa, Schneiderman and some of his staff, a couple of California Attorney General Kamala Harris’ staff people, and a boatload of administration people. So a lot of what I have been trying to do is combine what I am hearing from all those conversations with what I am seeing other places. My assessment of what people tell me is based partly on how much I trust them (which can admittedly be flawed; such things are highly subjective judgment calls), but mostly my read of the political dynamic, which is of course different for each of the players'.

On Jan. 27, I released a story outlining what sources high up in the settlement negotiations told me would be the nature of the legal release for the banks. Some of the phrases they gave me, such as the phrase “vast majority” (used twice) were pretty vague, and because I hadn’t seen the actual language, I was reporting only what I was told. But it sounded like we were headed toward fairly tight release language on the settlement. However, the very same day, Masto sent a letter to Shaun Donovan at HUD, Attorney General Tom Miller, and DOJ settlement chair Tom Perrelli with a list of 38 detailed questions indicating either that she had yet to see any language, or that any settlement language she had seen was so vague and poorly written as to cause big worries about the nature of the settlement. Her questions raised alarm bells with me and with writers I respect, including David Dayen and Yves Smith, because if she had seen the release language and was asking these kinds of questions, it probably meant very bad things, and certainly would have meant I had been lied to by my sources on Jan. 27.

One possibility, of course, is that Attorney General Masto doesn’t know what she is talking about, or is acting in bad faith, raising questions she already knows the answers to. I do not believe that for a minute. From everything I have heard, Masto is a very smart and capable Attorney General who is fighting hard for Nevadans who have been royally screwed over by mortgage fraud. Nevadans have been hit harder than anyone by the rampant levels of fraud in every aspect of the housing market in recent years, with a stunning 60 percent of Nevada homeowners in underwater mortgages. Masto’s letter shows that she and her staff are deep into the nitty-gritty on these issues, and that she is asking all the right questions. I have confidence that she is fighting the good fight effectively on behalf of her constituents.

But I still find it difficult to believe the administration would be so politically stupid to appoint a high-profile task force to investigate financial fraud; make a big deal about it by announcing in the State of the Union address; have Schneiderman sit in the First Lady’s box; talk about it extensively in another big speech on housing yesterday; leak something about the settlement where they claim the release will be very narrow and tight; and then have a settlement with a release that is weak, broad, and full of loopholes so that their shiny new task force is dramatically undermined and rendered toothless. Trust me, I have seen the polling: This is a President whose path to re-election could not be more clear — he needs to have credibility as a champion against the abuses of Wall Street, and he needs to have a fired-up base. The firestorm that would be created if this administration would agree to a bad settlement after all this build-up would be immense, with close allies like the AFL-CIO and MoveOn.org denouncing the administration, and Occupy and community organization demonstrators around the country protesting Obama at every campaign stop.

I also can’t imagine Attorneys General like Eric Schneiderman and Kamala Harris, who have built their political brand and base dramatically by standing up against a weak settlement, agreeing at this late date to something bad. It doesn’t make any political sense at all for them to do that. Schneiderman’s reputation will now live or die with the success of this new financial fraud task force, so why would he ever agree to a settlement that didn’t allow him full running room to thoroughly investigate financial fraud? I don’t know all the legal ins and outs of this, but I do know politics, and a weak settlement at this point doesn’t make any sense to me.

So if Masto isn’t in the wrong, and the settlement release language is relatively strong, where does that leave me? My strong hunch is that Masto, at least as of the time she sent the letter (no way to tell what she has seen since), still hadn’t seen much if any of the language being proposed in the settlement agreement. If that conclusion is correct, I think the administration has been making a serious mistake in the bargaining strategy on this settlement. I’m sure there are things I’m not understanding about all this, and I feel for the people trying to herd 51 Attorneys General, five big banks, and multiple government agencies all in the same direction. It’s got to be just a mess. But given how late in the game this is—HUD Secretary Donovan is saying there was a deadline for the Attorneys General to say yes or no by the end of this week—for an Attorney General in a state as central to the housing crisis as Nevada to not have seen the proposed settlement language by last Friday would be a travesty.

I don’t know what the answer to this mystery is. Maybe my political instincts are all wrong, or there are deep things I’m not getting about what is going on, but I think the administration needs to be talking more to Attorneys General like Masto to get this right, and to make sure her questions get answered. Most importantly of all, if there is to be a settlement, the release language needs to be as tight as a drum, or all hell will break loose.

I think we’ll know more very soon.