Press Releases

Administration Picked Liberal Activist Groups Over Victims in Bank Settlements


Washington, May 19, 2016 -

WASHINGTON - The Financial Services Oversight and Investigations Subcommittee held a hearing today to determine whether the funneling of settlement funds to third party groups as part of the Obama Administration’s settlement agreements with banks subverted congressional appropriations powers.

“Since last year, this committee has been investigating the Obama Administration’s use of bank settlement agreements as a slush fund to support liberal activist groups. Today’s hearing examines this practice and its impact on Congress’s power of the purse,” Subcommittee Chairman Sean Duffy (R-WI) said. 

Key Takeaways:

  • The Department of Justice and the Department of Housing and Urban Development are subverting Congress’s Article I appropriations power by funneling bank settlement funds to third parties, including liberal activist groups.
  • By allowing liberal activists groups to receive and then distribute these settlement funds, the Administration basically created a slush fund for its political cronies that is not subject to congressional oversight. 
  • Not only did settlement funds go to groups that were not harmed, the Administration incented banks to pay non-victim third parties at the expense of offering assistance to the individual homeowners that were allegedly harmed by the banks’ actions.
  • Rather than funneling money to activists groups, the Administration should have sent money directly to victims for mortgage modification, refinancing or loan forgiveness.

Topline Witness Quotes:

“The question is—or at least should be—whether the agency is using settlements as a way of directing funds to projects Congress has not funded or more funds to projects for which Congress has provided limited funding…[I]t strikes me as deeply troubling from the perspective of the Appropriations Clause and Congress’ power of the purse.” – Ambassador C. Boyden Gray, Partner, Boyden Gray & Associates

“Third-party payment conditions unlawfully substitute appointed Justice Department officials for elected members of Congress as decision makers in the appropriations process. No one stumbles into making that switch. In fact, it is fair to say that those conditions are a naked attempt to circumvent the constitutional process for appropriating taxpayer dollars by the very people the clause was intended to constrain: executive branch officials…This practice denies the public not only money to which it is entitled, but also the opportunity to know how public funds are spent and to hold elected officials accountable for their choices.” – Paul Larkin, Senior Legal Research Fellow, Heritage Foundation

“At least one of these settlement provisions includes an additional problematic feature. Under the Bank of America Settlement Agreement, certain funds are designated for ‘the payment of consumer tax liability as a result of consumer relief’ unless and until, inter alia, ‘any extension to the Mortgage Forgiveness Debt Relief Act of 2007 or its equivalent becomes effective through the end of 2015,’ at which point remaining designated funds would go to NeighborWorks America and IOLTA…Above and beyond the Appropriations Clause problem, a settlement payment that is contingent on a future Act of Congress would seem to run afoul of this separation-of-powers principle.” – Nicholas Quinn Rosenkranz, Professor of Law, Georgetown University Law Center and Senior Fellow in Constitutional Studies, The Cato Institute 


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