Media coverage of the economic consequences of sequestration -- steep federal budget cuts mandated by Congress' failure to pass deficit reduction legislation -- has largely ignored the effects of these cuts to the Department of Justice, which in recent years has brought a number of enforcement actions against financial institutions that violate fraud and fair lending laws.
However, comments from Attorney General Eric Holder in an interview with NPR Legal Affairs correspondent Nina Totenberg make clear that the potential effects of the now-delayed sequester could be especially damaging to the DOJ and could seriously hamper litigation against the financial institutions that fueled the Great Recession.
A Media Matters search of major newspapers and evening news transcripts available on Nexis indicated that the media did not explain the economic consequences of mandatory budget cuts to the Department of Justice prior to the fiscal cliff deal, which postponed sequestration for two months.
In the interview given after a speech he delivered at the John F. Kennedy Presidential Library and Museum, Holder revealed that DOJ's need to budget public safety programs in the event of sequestration would sideline successful attempts to hold banks accountable for the mortgage fraud and discrimination that partially caused the Great Recession.
Holder explained the "reality" that civil cases brought by DOJ and the recovery of "money on behalf of the American people" will "have to wait" if sequestration goes through, because public safety - such as maintenance of federal prisons - must be "prioritized." As reported by CNN.com:
U.S. Attorney General Eric Holder said Tuesday that if the Justice Department were faced with budget cuts due to sequestration, he believes that he would be able to maintain public safety by shifting resources and that the federal prison system could operate "for months" if necessary.
"I have the flexibility to move funds within the Department," Holder said.
However, nearly all civil cases would have to be put on hold, he added during an extended interview with National Public Radio reporter Nina Totenberg after giving an address at the John F. Kennedy Presidential Library in Boston.
If DOJ civil litigation is placed on the back burner, then so too is a large component of DOJ's efforts at compensating victims of the illegal mortgage practices of financial institutions before the recession. The DOJ has filed six lawsuits in response to past fraud and discrimination allegedly endemic among banks such as Wells Fargo, Citigroup, and Deutsche Bank, including a recently settled case against the Bank of America.
The DOJ alleged that one of Bank of America's acquisitions "charged black and Hispanic borrowers higher mortgage-lending fees or steered them into costly subprime loans even though their credit histories qualified them for a mortgage with more favorable terms."
DOJ has also recently accused Bank of America of engaging in a "spectacularly brazen" fraud that cost taxpayers more than $1 billion by "selling defective residential mortgage loans to Fannie Mae and Freddie Mac that later defaulted."
Now that the sequester has been postponed, national media has another chance to explain how mandatory budget cuts to DOJ, not just to the U.S. Courts, will affect access to justice for victims of big banks' financial malfeasance. As DOJ's civil litigation over illegal mortgage practices makes clear, the actions of institutions like Bank of America directly contributed to the housing bubble that fueled the Great Recession. In its coverage of the economic consequences of the sequester, the media should point out this specific harm to vulnerable homeowners.