A ‘slush fund’ by any other name

Cecil Whig - - OPINION - Ge­orge Will

— Be­cause truth in la­bel­ing laws are among the laws from which Wash­ing­ton feels ex­empt, the ti­tles of con­gres­sional leg­is­la­tion of­ten take lib­er­ties with the facts (e.g., the Pa­tient Pro­tec­tion and Af­ford­able Care Act). The Stop Set­tle­ment Slush Funds Act, how­ever, pre­cisely names the ailment for which it is the rem­edy.

The Jus­tice Depart­ment has ne­go­ti­ated “bank set­tle­ment agree­ments” whereby banks make resti­tu­tion to the gov­ern­ment for the dam­age they al­legedly did in con­nec­tion with the cre­ation and sale of res­i­den­tial mort­gage-backed se­cu­ri­ties in the sub­prime mort­gage cri­sis. Our sub­ject here is not, how­ever, whether the sums ex­tracted from the banks (e.g., Cit­i­group $7 bil­lion, Bank of Amer­ica $16.65


bil­lion, JPMor­gan $13 bil­lion) are pro­por­tion­ate to their al­leged cul­pa­bil­i­ties. Rather, our sub­ject is what Jus­tice does with mil­lions of these dol­lars.

Jus­tice al­lows banks to meet some of their set­tle­ment obli­ga­tions by di­rect­ing “do­na­tions” to var­i­ous non­govern­men­tal ad­vo­cacy or­ga­ni­za­tions that serve Demo­cratic con­stituen­cies and ob­jec­tives — or­ga­ni­za­tions that were nei­ther par­ties to the case nor vic­tims of the banks’ be­hav­iors. These do­na­tions are from money owed to the gov­ern­ment, money that oth­er­wise would go to the U.S. Trea­sury, money the dis­po­si­tion of which is prop­erly Congress’ re­spon­si­bil­ity.

So the do­na­tions are, in ef­fect, ap­pro­pri­a­tions of public money. The pesky Con­sti­tu­tion, how­ever, says: “No money shall be drawn from the Trea­sury, but in con­se­quence of ap­pro­pri­a­tions made by law.” As a con­gress­man al­lied with Grover Cleve­land once said to a fel­low leg­is­la­tor who con- sidered one of his ini­tia­tives un­con­sti­tu­tional, “What’s the Con­sti­tu­tion be­tween friends?”

Pro­gres­sives, who fa­vor ex­pan­sive no­tions of ex­ec­u­tive dis­cre­tion, and hence the marginal­iza­tion of Congress, re­gard the “do­na­tions” as just an­other an­o­dyne man­i­fes­ta­tion of in­her­ent pres­i­den­tial dis­cre­tion in en­forc­ing laws. At a May con­gres­sional hear­ing, three con­sti­tu­tional scholars — Ge­orge­town Uni­ver­sity law pro­fes­sor Ni­cholas Quinn Rosenkranz, The Her­itage Foun­da­tion’s Paul Larkin, and Boy­den Gray, White House coun­sel to Ge­orge H.W. Bush — dis­agreed.

Be­cause ev­ery­thing gov­ern­ment does costs money, the ap­pro­pri­a­tion power, Rosenkranz tes­ti­fied, is Congress’ “most po­tent check on ex­ec­u­tive over­reach” — “the ul­ti­mate back­stop” against “a will­ful pres­i­dent.” If pres­i­dents could dis­burse money with­out an ap­pro­pri­a­tion, “the care­ful con­sti­tu­tional sep­a­ra­tion of pow­ers would be thrown into dis­e­qui­lib­rium.” The cur­rent pres­i­dent re­lies on dis­burse­ments that cir­cum­vent the Ap­pro­pri­a­tions Clause: The U.S. Dis­trict Court for the Dis­trict of Columbia has held that his ad­min­is­tra­tion has, in sup­pos­edly en­forc­ing the ACA, il­le­gally dis­bursed bil­lions of dol­lars to in­sur­ance com­pa­nies with­out a con­gres­sional ap­pro­pri­a­tion.

“Congress,” Larkin re­minded Congress, “does not give the pres­i­dent a credit card or a cash­box that he can use to pur­chase goods and ser­vices or dis­burse ap­pro­pri­a­tions as he sees fit. Congress iden­ti­fies pre­cisely who may re­ceive fed­eral funds.” With the “do­na­tions,” Jus­tice re­wards con­ge­nial groups with­out any di­rec­tion from Congress or ju­di­cial over­sight. Al­though it is, Larkin said, “a fed­eral of­fense for a gov­ern­ment of­fi­cer to spend money in ex­cess of the sum that Congress has ap­pro­pri­ated,” he noted that the do­na­tions rep­re­sent ex­ecu- tive law­less­ness known at the state level: When Chris Christie headed the U.S. At­tor­ney’s Of­fice for the Dis­trict of New Jersey, he “ne­go­ti­ated a non­pros­e­cu­tion agree­ment with Bris­tolMy­ers Squibb in which the com­pany agreed, among other things, to make a $5 mil­lion gift to Se­ton Hall Uni­ver­sity’s law school — Christie’s alma mater — in or­der to avoid pros­e­cu­tion for se­cu­ri­ties fraud.”

Woodrow Wil­son, a for­mer New Jersey gov­er­nor and the Democrats’ first pro­gres­sive pres­i­dent, was the first pres­i­dent to crit­i­cize the Amer­i­can Found­ing. He was par­tic­u­larly hos­tile to the sep­a­ra­tion of pow­ers, which he con­sid­ered an anachro­nis­tic im­ped­i­ment to ex­ec­u­tive ef­fi­ciency. The bank set­tle­ment do­na­tions are an­other step nul­li­fy­ing the Ap­pro­pri­a­tions Clause’s 16 words, which but­tress the sep­a­ra­tion of pow­ers.

“In the end,” Gray tes­ti­fied, “ev­ery other con­sti­tu­tional power runs into the ap­pro­pri­a­tions power.” This is why pres­i­dents have “con­sis­tently en­deav­ored to seize the ap­pro­pri­a­tions power from Congress.” The Con­sti­tu­tion was just 20 years old when, in 1809, Congress felt the need to en­act “leg­is­la­tion de­signed to pre­vent the pres­i­dent from re­pur­pos­ing ap­pro­pri­ated funds from one ob­ject to an­other.” Sub­se­quent pres­i­dents have ob­li­gated funds in ex­cess of ap­pro­pri­a­tions, thereby forc­ing Congress to choose be­tween ap­pro­pri­at­ing the funds or im­pair­ing the coun­try’s credit. Congress of­ten has been com­plicit in its own diminu­tion, as when it em­pow­ered the Con­sumer Fi­nan­cial Pro­tec­tion Bureau to com­man­deer fund­ing from the Fed­eral Re­serve Sys­tem.

Base mo­tives of self-ag­gran­dize­ment have im­pelled many pres­i­dents to dis­re­gard the sep­a­ra­tion of pow­ers. Pro­gres­sive pres­i­dents do this as a mat­ter of prin­ci­ple, which is worse.

Ge­orge Will is a syn­di­cated colum­nist. Con­tact him at ge­orgewill@wash­post.com.

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