Congress to Consider a Bill to Halt Government Slush Funds


On July 13, 2016, Cause of Action (CoA) Institute filed a complaint in the U.S District Court for the District of Columbia against the United States Housing and Urban Development (HUD). The lawsuit seeks records that HUD has failed to produce in response to a Freedom of Information Act (FOIA) request regarding HUD’s role in the federal government multi-million dollar settlements with three banks over their allegedly faulty mortgage practices.  As CoA Institute continues to investigate and litigate, others are paying attention to these troubling settlements as well.

Last week, prominent Washington Post columnist George Will penned a column calling out the government for using the bank settlements as a slush fund.  Will notes that the government:

allows banks to meet some of their settlement obligations by directing “donations” to various nongovernmental advocacy organizations that serve Democratic constituencies and objectives — organizations that were neither parties to the case nor victims of the banks’ behaviors. These donations are from money owed to the government, money that otherwise would go to the Treasury, money the disposition of which is properly Congress’s responsibility.

And in the Wall Street Journal, Andy Koenig, senior policy adviser at Freedom Partners Chamber of Commerce, similarly focuses on one of the key facets of these settlements: financial incentives for the banks to fund third party groups:

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. There are scores of other examples.

To address the growing chorus of concerns over these controversial settlements, the House of Representatives today will consider the “Stop Settlement Slush Funds Act of 2016,” a bill introduced by Rep. Bob Goodlatte (R-Va.)  to prevent any such future settlements. In other words, the bill would prohibit the government from creating a slush fund to direct settlement payments to favored (or any other) outside recipients.  The U.S. House of Representatives has scheduled a vote on this bill for September 7, 2016.

**UPDATE** The House passed the “Stop Settlement Slush Funds Act of 2016” on September 7 by a vote of 241-174.