Congress Claims Regulators Misused Bank Settlement Proceeds From RMBS
Recurring Theme: Transparency
In 2012, the Obama Administration formed the Residential Mortgage-Backed Securities (RMBS) Working Group, a federal and state oversight body, to investigate misconduct that contributed to the 2008 financial crisis. The proceeds of resulting settlements were designed to support consumers harmed by the crisis. Four years later, the RMBS Working Group and Department of Justice (DOJ) have assessed more than $11 billion in penalties to be paid out in the form of consumer relief.
However, it has come to light that the allocation of that relief has not been as straightforward and transparent as originally imagined. Media and congressional inquiries have reported that many of the settlement funds have gone to liberal-leaning nonprofit groups, such as La Raza, the National Community Reinvestment Coalition, and the National Urban League, all thought to align with the Obama Administration. Banks with settlement agreements have an incentive to donate to these nonprofits as the donations can offset settlement amounts. The issue has already inspired legislation; Representative Bob Goodlatte (R – VA) introduced the Stop Slush Funds Act, HR 5063, in the House Judiciary Committee in July.