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
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.
