...In conjunction with the Justice Department, the RMBS Working Group ["a coalition of federal and state regulators and prosecutors"] has reached multibillion-dollar settlements with essentially every major bank in America.The money does not go to any individual who demonstrably lost money as a result of the banks' actions. Instead,
...in April ... the Justice Department announced a $5.1 billion settlement with Goldman Sachs. In February Morgan Stanley agreed to a $3.2 billion settlement. Previous targets were Citigroup ($7 billion), J.P. Morgan Chase ($13 billion), and Bank of America,... $16.65 billion...
... a substantial portion is allocated to private, nonprofit organizations drawn from a federally approved list. Some groups on the list—Catholic Charities, for instance—are relatively nonpolitical. Others—La Raza, the National Urban League, the National Community Reinvestment Coalition and more—are anything but.
...Many of these groups engage in voter registration, community organizing and lobbying on liberal policy priorities at every level of government. They also provide grants to other liberal groups not eligible for payouts under the settlements...
...Most of the deals give double credit or more against the settlement amount for every dollar in “donations.” Bank of America’s donation list—the only bank to disclose exactly where it sends its money—shows how this benefits liberal groups. The bank has so far given at least $1.15 million to the National Urban League, which counts as if it were $2.6 million against the bank’s settlement. Similarly, $1.5 million to La Raza takes $3.5 million off the total amount of “consumer relief” owed by the bank...I wrote about this quite a while ago, when I was astonished to find the Federal Reserve going along with the DOJ and attorneys general, using its "safety and soundness" regulatory power to force banks to give money to activist groups.
As part of their “consumer relief” penalties, Bank of America and J.P. Morgan Chase must also pay a minimum $75 million to Community Development Financial Institutions—taxpayer-funded groups propped up by the Obama administration as an alternative to payday lenders. “Housing Counseling Agencies” also get at least $30 million. This essentially circumvents Congress’s recent decision to cut $43 million in federal funds routed to these groups through the Department of Housing and Urban Development.
The politicians who negotiate the settlements as part of the RMBS Working Group have also directed money to their supporters and states. Illinois’s Democratic attorney general Lisa Madigan announced she had secured $22.5 million from February’s Morgan Stanley deal for her state’s debt-ridden pension funds—a blatant payout to public unions. The deals with J.P. Morgan Chase, Bank of America and Citigroup yielded a further $344 million for both “consumer relief” and direct payments to pension funds.
New York hit the jackpot too. Attorney General Eric Schneiderman, also a Democrat and chairman of the RMBS Working Group, arranged for Morgan Stanley to fork over $400 million to New York nonprofits and $150 million to the state.
This story rings a few bells.
1) Regulation. What's wrong with regulation and economic law is not really "too much" or "too little" -- the standard old argument --but how it works -- the steady politicization of economic law and regulation, the decline in rule-of-law protections, the increasing use of the Administrative state to force political compliance.
Why didn't the banks fight? Why didn't they object to where their money was going? Why do they (except B of A) not even disclose their "charitable" contributions under the settlement? The government, now with the Fed along for the ride, can really make their lives difficult, of course! Hefty speaking fees to likely political officials, a strong revolving door to Washington, and keeping the payments secret are cheap investments to keep this sort of thing at bay.
2) Nonprofits. The public image of nonprofits are Red Cross, or Stanford. As you can see, many "nonprofits" have become a way to funnel money to politics. I'd like to get rid of "nonprofits," or to the corporate tax and estate tax which creates nonprofits. I think the good ones will survive. The substitution effect should outweigh the income effect.
3) Spending. Another tired argument is too much vs. too little spending. But look how our government manages to direct A to give to B, all the while keeping the tax and spending off the books.
What to do? Koenig suggests
... Rep. Bob Goodlatte (R., Va.) introduced a bill in April that would prevent government officials from enforcing settlements that funnel money to third parties, and it needs to gain wider traction with his colleagues. The political shakedowns disguised as public service must end.This does seem like a practice that Congress could end, this way or others. Any money paid in a legal settlement must go to people actually hurt by the illegal action, or to the US Treasury.
There isn't a magic bullet. The dissolution of rule of law has to be met by, well, laws with rules in them.