Goodlatte Statement at Regulatory Reform Subcommittee Hearing on the “Stop Settlement Slush Funds Act of 2016”

Washington, D.C. – (RealEstateRama) — Chairman Goodlatte: Eighteen months ago, this Committee commenced a “pattern or practice” investigation into the Justice Department’s mortgage lending settlements. We found that DOJ is systematically subverting Congress’s spending power by requiring settling parties to donate money to activist groups.

In just the last two years, DOJ has directed nearly a billion dollars to third-parties entirely outside of Congress’s spending and oversight authority. Of that, over half-a-billion has already been disbursed or is committed to being disbursed. In some cases, these mandatory donation provisions reinstate funding Congress specifically cut.

Whether the beneficiaries of these donations are worthy entities or not is entirely beside the point. The Constitution grants Congress the power to decide how money is spent, not DOJ. This is not some esoteric point.  It goes to the heart of the Separation of Powers theory and Congress’s ability to rein in the Executive in practice.

Certainly, DOJ’s authority to settle cases necessarily includes the ability to obtain redress for victims.  However, federal law understands victims to be those “directly and proximately harmed” by a defendant’s acts.  Once those victims have been compensated, deciding what to do with additional funds extracted from defendants becomes a policy question properly decided by elected representatives in Congress, not agency bureaucrats or prosecutors.  It is not that DOJ officials are necessarily funding bad projects, it is that, outside of compensating actual victims, it is not their decision to make.

We have brought these reasonable concerns to DOJ. But rather than suspend the practice of mandatory donations, DOJ has doubled down. Just two weeks ago, a major DOJ bank settlement required $240 million in “Financing and/or donations” toward affordable housing.

It is time for Congress to take action to end this abuse.

The Stop Settlement Slush Funds Act of 2016 (H.R. 5063) bars mandatory donation terms in DOJ settlements. It is a bipartisan bill.

It makes clear that payments to provide restitution for actual harm, directly caused, are not donations.

It explicitly references the environmental context where the injury to the environment may be diffuse and there may be no identifiable victims. The bill deals with this by explicitly permitting payments to remediate environmental damage. If direct remediation of the harm is impossible or impractical, the violator is not let off the hook. The full penalty is paid, but into the Treasury.

The principle is clear, but the details need to be studied. I am pleased we have an expert panel today to offer views. I am particularly interested to hear their thoughts on the scope of the bill. It covers civil settlements.  Is that sufficient? What about the language permitting remediation of harm “directly and proximately” caused?  Does that impose a sufficiently tight nexus between the payment and the offense to prevent further DOJ mischief?

So I am eager to hear from our witnesses. I thank them for coming.  I also thank all of the bill’s cosponsors, in particular, Subcommittee Chairman Marino, Representative Peterson, Chairman Culberson, and every Republican Member of this subcommittee.

Click here to learn more about today’s hearing.

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