OBAMA-HOLDER DOJ

The Department of Justice’s Slush Fund

March 2, 2017 by Jeff Carlson, CFA

News of a Department of Justice “Slush Fund” has been making headlines recently.

Unfortunately, this is not new information – the activity goes back to 2012 and can be traced to The Residential Mortgage-Backed Securities Working Group (Working Group), created in 2012 by none other than Obama’s first Attorney General, Eric Holder. Let’s just say that I view Mr. Holder as “ethically-challenged”.

The Working Group was created within the Justice Department in 2012 as a means of prosecution and punishment for those perceived to be responsible for the financial crisis of 2008. At its formation Mr. Holder made the following statement:

“Over the past three years, we have been aggressively investigating the causes of the financial crisis. And we have learned that much of the conduct that led to the crisis was unethical, and, in many instances, extremely reckless. We also have learned that behavior that is unethical or reckless may not necessarily be criminal. When we find evidence of criminal wrongdoing, we bring criminal prosecutions. When we don’t, we endeavor to use other tools available to us.”

These “other tools” are usually civil sanctions and charges that generally result in large fines being paid by firms, often without a statement of true wrongdoing.

With the full weight of the Department of Justice behind it, the Working Group reached multi-billion settlements with virtually every major bank in America. In total, $110 billion was collected in fines. So where did all this money go? According to a Wall Street Journal report the money breaks down as follows:

$49 billion went to the Department of Treasury – some directly, but most funneled to Treasury through settlements with Fannie Mae and Freddie Mac. Spending of proceeds has not been specified.

$45 billion was for Consumer Relief – a vaguely defined category that includes borrowers and “housing-related community groups“. Breakdowns are not fully known.

$10 billion went to “other recipients” – most appear to be federal in nature.

$5.3 billion went to states to spend as they wanted.

$450 million went to the Department of Justice. Spending of proceeds has not been specified.

The lack of transparency is disturbing. What follows is alarming.

https://themarketswork.com/2017/03/02/the-department-of-justices-slush-fund /