Obama Administration Shaking Down Banks To Fund Political Allies

Randy DeSoto
Western Journalism

The Obama administration once again appears to be employing extra-constitutional ways to get around Congress and fund many of its favorite organizations, some of which are engaged in political activities.

The Wall Street Journal reports that the administration in 2012 set up the Residential Mortgage-Backed Securities Working Group, a coalition of federal and state regulators and prosecutors set up to “identify, investigate, and prosecute instances of wrongdoing” in the residential mortgage-backed securities market.

In conjunction with the Justice Department, the RMSB has reached multimillion-dollar settlements with nearly major bank in the country.

The settlements include $5.1 billion from Goldman Sachs; Morgan Stanley, $3.2 billion; Citigroup, $7 billion; J.P. Morgan Chase, $13 billion; and Bank of America, the largest of them all, $16.65 billion.

The administration then turns around and incentivizes and informs these banks they can pay down their penalties by “donating” to a list of approved organizations, on a better than two-for-one dollar basis.

For example, Bank of America donated “$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. There are scores of other examples,” The Wall Street Journal reported.

There is no cap on the amount banks can use these donations to bring down the penalties assessed.

“Many of these groups engage in voter registration, community organizing and lobbying on liberal policy priorities at every level of government,” the Journal noted. “They also provide grants to other liberal groups not eligible for payouts under the settlements. Thanks to the Obama administration, and the fungibility of money, the settlements’ beneficiaries can now devote hundreds of thousands or even millions of dollars to these activities.”

“It appears that DOJ is systematically subverting Congress’s budget authority by using the settlements to funnel money to favored activist groups,” said House Judiciary Chairman Bob Goodlatte, R-Va., and House Financial Services Chairman Jeb Hensarling, R-Texas, in a May 2015 letter to Attorney General Loretta Lynch, the Washington Examiner reported.

A 2012 U.S. Attorneys’ Bulletin explicitly stated the reason to have the banks make these donations is to the circumvent the law regarding penalties being paid directly to the Treasury and avoid having to go through the normal appropriations process.

“First, it is important that a plea agreement containing a community service provision be negotiated and executed prior to the admission of guilt,” the memo stated. Doing it this way “minimize[s] the risk that the government might be deemed to be in constructive receipt of the community service funds, which would raise [Miscellaneous Receipts Act] concerns.”

According to the Journal, Rep. Goodlatte 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.”

As reported Western Journalism, as a means of mitigating the disastrous financial impact the Affordable Care Act is having on insurers, the Obama administration announced earlier this year it will hand out over $7 billion to companies from fees collected through the ACA.

The only problem is the law authorizes a fixed share of those funds to be used for that purpose and the rest is to go Treasury’s general funds. The administration has handed over all the funds collected without obtaining a change in the law.