FOR IMMEDIATE RELEASE: Thursday, April 30, 2015
MEDIA CONTACT: Caitlin Conant (Portman) | 202-224-5190
Sarah Feldman (McCaskill) | 202-228-6263
Washington, D.C. – Today, U.S. Senators Rob Portman (R-Ohio) and Claire McCaskill (D-Mo.), the Chairman and Ranking Member of the U.S. Senate Permanent Subcommittee on Investigations (PSI), wrote Attorney General Loretta Lynch concerning monitoring of multibillion-dollar settlements entered into between the Department of Justice (DOJ) and Bank of America, Citigroup, and JPMorgan Chase arising out of the sale of mortgage backed securities before the financial crisis of 2008. With approximately $13 billion in settlement funds slated to go to third parties, Portman and McCaskill urged the adoption of effective oversight to ensure the settlements are used to help those hurt by the housing market downturn, and not misdirected to inappropriate purposes. The letter asks for details regarding the banks’ compliance with the consumer relief provisions of the settlements and safeguards to ensure the settlement funds are well-spent.
“Ohio was hard hit by the housing crisis, and many homeowners and communities continue to struggle with its effects—including the blight caused by abandoned properties,” Portman said. “The Department of Justice has a duty to ensure that funds secured through these settlements are used to address genuine, high-priority needs, such as land-banking and foreclosure relief in Ohio, rather than being diverted for inappropriate uses.”
“The collapse of the housing market did a great deal of damage to Missouri’s economy, and while it continues to recover, it’s critically important that there are safeguards in place to ensure these resources are spent fairly, effectively, and with sufficient oversight,” said McCaskill.
In addition to billions of dollars in direct fines and payments to governmental entities, the financial crisis settlements call for the banks to provide several billion dollars in direct and indirect consumer relief. Third party organizations are eligible to receive a significant share of these settlement dollars.
Portman and McCaskill note that with such large sums at stake, there is a need for effective oversight to ensure those funds are used to help homeowners and neighborhoods hurt by the housing crisis, but the oversight framework appears to be deficient. The Department of Justice has told Congress that specially-appointed monitors — generally, private law firms — are responsible for ensuring that settlement funds are allocated and spent appropriately. But the monitors’ own public reports regarding the Citigroup, Bank of America, and JPMorgan settlements suggest that the monitors’ role is more limited. According to those reports, the monitors are responsible for reviewing whether the banks have paid out funds or forgiven debt in accordance with the terms of their settlement agreements. They make no mention, however, of any responsibility for overseeing how third parties actually deploy resources received through the settlements.
Among other questions, the letter asks what safeguards are in place to prevent settlement dollars from being diverted to inappropriate activities and asks for an accounting of how much has been spent on all types of consumer relief, including disbursements to third parties, to date.
The full text of the letter can be found here.