Wells Fargo and Citigroup declined to comment. BofA, Chase and Ally did not respond to requests for comment.
The banks could still choose to settle with the remaining states. However, Brescia said the banks would have little motivation to do so without California and New York on board.
"From the banks' perspective, they need to have all the attorneys general in the room for this to work at all," Brescia said.
The decision to bow out from the talks came one week after Harris met face to face with banking representatives in Washington. At that meeting, according to people familiar with the discussions who were not authorized to speak, the main subject of contention was the banks' request to be broadly released from potential future legal claims, particularly those surrounding potential misconduct in the packaging and selling of mortgage-backed securities.
In a letter sent Friday to Miller and to U.S. Associate Atty. Gen. Thomas Perrelli, Harris referred to the latest proposed settlement, which has not been released publicly, as "inadequate for California homeowners" because, "In return for this broad release of claims, the relief contemplated would allow too few California homeowners to stay in their homes."
In her letter and in her interview with The Times, Harris said she planned to continue to investigate the mortgage practices that contributed to California's housing crisis through the 25-person Mortgage Fraud Strike Force. The group has a mandate to look at all levels of mortgage fraud.
In rejecting the 50-state talks, California widens the rift among law enforcement officials nationwide over the best way to pursue banks for their mortgage misdeeds. New York Atty. Gen. Eric Schneiderman, who was originally part of the 50-state negotiations, has launched a wide-ranging investigation into Wall Street's role in the mortgage meltdown, focusing on the institutions' efforts to bundle low-quality mortgages into sophisticated bonds.
Harris met with Schneiderman in July and at that point told The Times that she was considering joining his investigation, but she said Friday that California would go its own way.
"California will definitely walk its own path, and to the extent that New York or any other state wants our assistance, of course we are happy to give it," she said. "We do realize that we are the biggest state in the country and we are happy to help the smaller states."
A spokesman for Schneiderman said he would work with California.
"Atty. Gen. Schneiderman looks forward to his continued work with Atty. Gen. Harris and his other state and federal counterparts to ensure those responsible for the mortgage crisis are held accountable and homeowners who are suffering receive meaningful relief," said Danny Kanner, a spokesman for Schneiderman.
Schneiderman has been highly critical of the 50-state settlement and expressed concern that his counterparts in other states may let the banks off too lightly and provide release from liability from other efforts to bring them to account for their misdeeds. Schneiderman has also won support from attorneys general in Delaware, Nevada, Massachusetts, Kentucky and Minnesota, some of whom have launched their own investigations.
In April, federal banking regulators ordered the nation's biggest 14 banks to overhaul their procedures and compensate homeowners injured financially by wrongdoing or negligence, but those moves were immediately decried by consumer advocates as too weak.
Now even those efforts are likely to take a year or more to complete because of the complexity of the reforms needed, according to recent remarks by acting Comptroller of the Currency John Walsh.