Nearly a decade after the crash of the U.S. Housing market, the Obama Administration continues to pursue claims against large financial institutions accused of contributing to the crash. For instance, in the past three years the Department of Justice (DOJ) settled with JPMorgan Chase & CO. in November 2013, Citigroup Inc. in July 2014, and Bank of America in August in 2014. These settlements concerned allegations related to the issuance of residential mortgage backed securities, and collectively these three settlements alone have totaled $36.65 billion in payments from the banks to various federal, state, non-governmental organizations, and direct consumer relief.
In a report released on Thursday by the Senate Homeland Security and Governmental Affairs Committee detailing how the DOJ has essentially become a massive crime syndicate in the business of shaking down financial institutions, the report noted that the DOJ’s Housing settlements removed millions of dollars of third party payments from the Congressional appropriations process as well as judicial review. Of the settlement funds set aside for consumer relief, at least $640 million was set aside for third party payments to be disbursed by the banks according to the the settlement terms. By routing funds away from the U.S. Treasury, the settlements have been able to circumvent congress’s spending authority as well as oversight.
Meaning, the DOJ unilaterally controlled the allocation of billions of dollars absent congressional and judicial involvement by forcing banks, under the terms of the settlement agreements, to distribute hundreds of millions of funds to third party organizations pre-approved by the Department of Housing and Urban Development (HUD). Moreover, the DOJ did not require third party disbursements to go to homeowners actually aggrieved by the alleged wrong doing. Of the $36.65 billion in total settlements reached by the DOJ with these three financial institutions alone, the DOJ earmarked $13.5 billion for “consumer relief,” of which hundreds of millions are to be dispersed to selected third party groups approved by the administration. Naturally, the third party organizations are all politically active radical leftists groups.
To understand how the shake-down works, the DOJ, as the federal government’s representative in Criminal and Civil suits affecting the interests of the United States, has the ability to enter into settlements with other parties. This isn’t the issue in question. What is in question is how the DOJ is using this power in order to execute settlement agreements requiring banks to disburse money to third party groups, rather than collecting fines that are appropriately subject to the Congressional appropriations process. The reason the DOJ is going this route, rather than imposing fines that would collect more money from the banks, is because under these settlement agreements the DOJ is allowed to act without any congressional oversight completely outside the purview of Congress itself.
For an example of how this works, in August 2014, Bank of America settled with the DOJ for $16.5 billion based on a settlement agreement that was premised on the DOJ’s inquiry into “the packaging, origination, marketing, sale, structuring, arrangement, and issuance of residential mortgage-backed securities and collateralized debit obligations.” The settlement agreement required Bank of America to pay more than $8.2 billion in civil monetary penalties to federal entities and individual states. Furthermore, the agreement also stipulates that Bank of America must pay more than $7 billion in “direct consumer relief.”
In order to fulfill it’s $7 billion consumer relief obligation, Bank of America is required to provide, “a minimum of $2.15 billion in first lien principal forgiveness, $50 million in donations to community development financial institutions, $30 million in state-based Interest on Lawyers’ Trust Account organizations, and $20 million in donations to HUD-approved housing counseling agencies.” In addition, Bank of America is also required to take a $100 million loss in support of affordable rental housing. Which means, the DOJ has required Bank of America to make a $100 million donation to selected third party organizations, $20 million of which is also required to go to HUD approved “housing counseling agencies.” This example with Bank of America alone follows virtually the same exact requirement stipulated in the settlement agreement that the DOJ reached with Citigroup Inc., a pattern which the DOJ has followed against major financial institutions.
Following this pattern the DOJ has required these banks to distribute portions of their settlement payments to certain third-party groups which the DOJ directly influenced which groups would receive disbursements. Specifically, the DOJ narrowed the list of entities eligible to receive funds by selecting “HUD-approved housing counseling agencies” as the only entities to which the banks could make disbursements for credit. As the Wall Street Journal outlined in a piece highlighting the DOJ’s liberal slush fund, “the department is in the process of funneling more than half-a-billion dollars to liberal activist groups.”
Among the radical leftist groups pre-approved by the settlement agreements to directly receive funds from the banks is none other than The National Council of La Raza, which bills itself as “the nation’s largest Hispanic activist organization.” Yet, a brief history lesson on the reality of La Raza, which literally translates to “the race,” shows us that the group has been connected to the Chicano Student Movement of Aztlan (MEChA), an extremist Mexican race hate group which firmly believes in exploiting illegal immigration to bring about ‘La Reconquista’, a violent overthrow of the southern U.S. states that would be absorbed into Greater Mexico. It should come as no surprise that La Raza is favored under these settlement agreements given that the racist organization supports the Democratic cause of open borders while Cecilia Munoz, a La Raza senior vice president, also serves on the White House Domestic Policy Council.
According to a February 2016 independent monitor report, there are 147 “HUD-approved counseling agencies” that make up these third party groups like La Raza that are currently receiving hundreds of millions of dollars directly from the banks under the DOJ settlement agreements. You can read the monitor report in full by clicking here.
Moving on, the shake down continues as the DOJ, like every criminal enterprise, wants its cut of the funds agreed to under these settlements and under federal law they get it as the DOJ collects a three percent fee on each settlement agreement. Using the authorization granted to them by Congress in 1993 under the creation of the Three Percent Fund, the DOJ has been able to collect more than $1.5 billion through their Three Percent Fund from 2009-2015. According to the DOJ, “[t]he settlement funds subject to the Three Percent Fund are the federal payments in each settlement.” The DOJ may therefore collect three percent of every federal civil monetary penalty or settlement payment to a federal agency to settle claims before the funds make their way into the Treasury’s General Fund. Thus, these funds are never actually in the Treasury, and so they are not literally ―drawn from the Treasury, allowing the DOJ to circumvent congressional authority under the Appropriations Clause.
Further elaborating on this issue, Nicholas Quinn Rosenkranz, Professor of Law at Georgetown University, explained on Thursday in a hearing before the the United States House of Representatives Committee on Financial Services, “If the banks had paid this money to the United States—which is, after all, the plaintiff in these cases—then the money would have gone into the Treasury. And if, subsequently, the President or the Attorney General favored using this money to subsidize various ‘community development organizations,’ they would have had to request an appropriation from Congress.” But, “by providing for direct payment from the banks to [third party] organizations these settlement provisions evade the Appropriations Clause and cut Congress out of the loop.”
The DOJ has used this windfall in an unprecedented manner to operate outside of Congressional review. For instance, according to statistics compiled from a 2016 GAO report, the Three Percent Fund in 2009 had collected over $83 million, while in 2014 that number had increased six-fold to over $525 million. Moreover, the DOJ’s current intake of $575 million from only three settlements exceeds expectations from the funds 1993 inception by a factor of fifty. The GAO report concludes that the DOJ is depositing larger sums of money each year into its discretionary fund, distributing larger amounts each year to DOJ components, and continues to carry over a large balance not dedicated to any particular needs.
In short, the DOJ, leveraging the settlement process under threat of prosecution, has bypassed Congress and the Courts to secure settlement agreements to provide consumer relief funds to third-party radical leftist groups. Moreover, the DOJ has used a portion of the funds agreed to under the settlements to finance the administrations housing policy goals as the DOJ inserted its own spending priorities to pick certain groups, such as La Raza, to receive funds without any requirement that the funds be disbursed to aggrieved homeowners. Officials within the DOJ have also effectively skimmed off three percent from mortgage-related bank settlements and thus have been able to create a $500 million dollar slush fund allowing them to spend the money in whichever way they best see fit.
Like a criminal syndicate, the Obama administration shakes down banks, funds radical leftist organizations and makes themselves wealthy all the while using the power of the federal government under the guise of the DOJ acting with false pretenses to the law with purely political motivations.
The Daily Caller
Feds Divert MILLIONS To ‘Slush Fund’ That Fuels These Liberal Activist Groups
By Richard Pollock
Department of Justice officials diverted millions of dollars slated for victims of the 2008 housing meltdown to politically favored third parties, including “left-wing radical groups,” according to the chairman of a House of Representatives oversight subcommittee.
Rep. Sean Duffy , a Wisconsin Republican and chairman of the House Financial Services oversight and investigations subcommittee, said Friday the officials “skimmed” off three percent from mortgage-related bank settlements. This created what he called a $500 million “slush fund” that could be steered toward favored groups.
“The first objective of a settlement is to make sure that we have victims who are made whole,” Duffy said, referring to millions of Americans who lost their homes during the meltdown that led to the Great Recession of 2009. “If you’re diverting money away from victims and sending it to third-party activist groups, you have victims who are being harmed not just once, but a second time.”
Justice officials were long able to “skim 3 percent of any settlement money into their own account to for the most part spend it the way they see fit,” Duffy told participants in the media briefing hosted by the Cause of Action Institute, a nonprofit legal watchdog group.
“Many of us in Congress were alarmed when we found out about the bank settlements and the fact that money was not just going to victims and to the Treasury but there was a setup for settlement dollars to go to third-party groups,” he said.
Cause of Action questions the legality of the diversion of settlement funds to activists groups but has been repeatedly rebuffed by officials at the Department of Housing and Urban Development and the Justice Department. Duffy also believes the diversions are illegal and unconstitutional.
The Senate Homeland Security and Governmental Affairs Committee released a report Thursday showing a major year-to-year increase in the size of the three percent funds, going from $158 million in 2013 to $526 million in 2014.
Duffy charged that Justice and HUD officials “at a high level” cooperated in shutting out conservative housing and community organizations from access to federal funds set aside for housing assistance.
Under terms set by the Justice Department, Duffy said he could read documents about the bank settlement disbursements but could not reproduce them for public dissemination.
“It became clear to us that as this deal was structured, there was a keen eye to make sure that conservative groups could not access any money through these settlements,” he said.
Among the political activist groups favored by the settlements is La Raza, the nation’s largest Hispanic activist organization that routinely supports Democratic candidates and causes. Cecilia Munoz, a La Raza senior vice president, was appointed by Obama in 2012 to head the White House Domestic Policy Council.
La Raza is flush with money, reporting in 2013 to the IRS assets of $55 million. Janet Murguia, the group’s president and CEO was paid $417,000 that year, according to the group’s IRS tax return. Even so, La Raza is slated to receive at least $1 million from the Bank of America settlement and $500,000 from the Citigroup settlement.
Lisa Navarrete a spokeswoman for La Raza told The Daily Caller News Foundation that the group is one of 37 certified housing counseling agencies approved by HUD since 1998 during the Clinton administration. She said La Raza would pocket about 10 percent of the funds and the balance will go to local groups affiliated with La Raza to provide counseling for distressed Hispanic homeowners.
The Chicano Student Movement of Aztlan (MEChA) is also slated to receive $50,000 from the Bank of America settlement, according to Cause of Action.
In an oversight committee hearing held Thursday, Duffy said Justice officials in 2013 did not require mandatory donations to third party groups when it announced a record $13 billion mortgage bank settlement with J.P. Morgan Chase.
The rules apparently changed in July 2014, because as part of a $7 billion settlement with Citigroup, Justice officials “required a minimum of $10 million in donations to HUD-approved housing counseling agencies,” Duffy said.
A February 2016 independent monitor report about a Bank of America settlement, obtained by TheDCNF, showed that $125 million had been “donated” by the bank in 2014 to 147 “community” groups and “housing counseling agencies.”
To “incentivize” the donations to third party groups, federal officials permitted the banks to receive a two-dollar tax credit for every dollar they gave to community groups, twice as much as was credited for “principal forgiveness” for homeowners hardest hit by the economic collapse.
Cause of Action President and CEO Alfred J. Lechner Jr. said his group has filed a petition for rule-making with Justice and Treasury Departments concerning “whether the DOJ discretionary disbursements unlawfully directed settlement funds outside of the Treasury and unconstitutionally allocates taxpayer dollars.”
Lechner, who was appointed in 1986 to a federal judgeship, said the rule-making petition addressed “whether political cronyism motivated the terms of these residential mortgage-backed security settlements.”
“We’re looking at how routing of third-party settlement money to third-party groups without congressional authorization violates the power of Congress to appropriate funds. It appears this money would be better spent, better used for the victims of this mortgage crisis at the time,” he said.
A spokesman for La Raza did not respond to a request for comment.