The Residential Mortgage-Backed Securities Working Group (RMBS) is not exactly a household name, though the coalition of federal and state regulators and prosecutors created in 2012 to “identify, investigate, and prosecute instances of wrongdoing” in the residential mortgage-backed securities market is extremely powerful, if in a behind-the-scenes kind of way. In conjunction with the DoJ, the RMBS Working Group has negotiated billions upon billions of dollars in settlements with the biggest banks in America. Highlight deals include a $3.2 billion settlement with Morgan Stanley, a $5.1 billion settlement with Goldman Sachs, a $7 billion settlement with Citigroup, a $13 billion settlement with JPMC and the largest civil settlement in American history, the $16.65 billion from Bank of America.
Those, again, are just the headline makers — that barely scratches the surface of all the settlements with smaller banks.
All in all, $11 billion has been earmarked for “consumer relief” — a sort of murkily defined concept that basically amounts to “stuff to benefit homeowners” with the exact content of the “stuff” left to be determined. How much of that stuff amounted to putting funds into the hands of homeowners is unknown — there is no collected data on that topic. What there is data on is the notable number of the consumer relief dollars that have gone toward funding private nonprofit organizations drawn from a federally approved list.
So far, so good. Catholic Charities is on the list, for example, and they are apolitical, more or less. No one objects.
Where the issue gets sticky is when it comes to groups like La Raza, the National Urban League, the National Community Reinvestment Coalition and more — which are consumer support groups with a decidedly left-leaning political orientation. These groups engage in voter registration, community organizing and lobbying. They can also fund — via grants — organizations not eligible for payouts or funding through the settlements directly.
And due to the way the settlements with banks are structured, they are essentially steered toward paying in the form of donation as opposed to cash. Most of the deals give double credit or more for every dollar that is a donation.
Bank of America is the only bank to make its donation list public. So far it has given at least $1.15 million to the National Urban League and $1.5 million to La Raza. Those donations take $2.6 million and $3.5 million off the total amount of “consumer relief” owed by the bank. According to a Wall Street Journal analysis, among the 80 or so beneficiaries of BoA settlement, most brought in more than 10 percent of their budget last year through the bank’s donations.
Consumer relief also obligated some banks like BoA and JPMC to pay a minimum $75 million to Community Development Financial Institutions —taxpayer-funded groups that are meant to function as an alternative to payday lenders. “Housing Counseling Agencies” also get at least $30 million.
There have been some attempts to reform this rule so that third parties could not be entitled to consumer relief funds — Rep. Bob Goodlatte introduced a bill in April that would prevent government officials from enforcing settlements that funnel money to third parties, but it has not gotten much support.