The Durability of Legislative Benefits and the Role of the Executive Branch's Settlement Authority

Abstract

Following the 2008 Financial Crisis, the U.S. Department of Justice required several large financial institutions to pay large cash settlements for their role in collapse of the residential mortgage-backed securities market. A fraction of these cash settlements was instead funneled to government-approved nonprofit beneficiaries, many of whom had had their government grants reduced by Congress. I argue that this transfer is an insurance contract that the government uses to improve the durability of contracts between special interest groups and the legislature.