GOP: Bank settlements steered half a billion dollars to liberal groups

At a hearing on the Obama administration’s settlements with banks, Rep. Sean Duffy of Wisconsin, the chairman of the House Financial Services Committee’s oversight subcommittee, said the deals had been structured to send money to “liberal activist groups,” an arrangement he referred to as “slush funds.”

The Justice Department incentivizing banks to pay out fines to groups such as the National Council of La Raza “will not be tolerated,” Duffy said, after citing the half-a-billion dollar estimate.

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Duffy outlined how banks such as JPMorgan Chase and Citigroup were given incentives in settlements relating to sales of faulty mortgage-backed securities to send funds to groups for mortgage counseling rather than to use money to cut victims’ loan balances or otherwise directly provide relief.

Banks have agreed to pay out more than $200 billion in crisis-era suits, in aggregate.

The committee’s Republicans accused the Obama administration of infringing on Congress’ power of the purse with the settlements and creating “a slush fund for its political cronies that is not subject to congressional oversight.”

Democrats, predictably, objected to that characterization.

Rep. Keith Ellison, of Minnesota, took exception to the use of the term “slush fund,” which he noted is often used to denote illicit or illegal activity.

David Min, a University of California, Irvine law professor, testified that mortgage counseling has been proven to be effective in aiding underwater and struggling homeowners, and that directing money to that purpose was within the law.

The crisis-era settlements have been criticized by liberals at times because none has involved prosecutions of high-ranking executives at big banks. At the same time, conservatives have faulted them for the provisions funding nonprofits and other groups.