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Elizabeth W.
Democrat MA

About Sen. Elizabeth
  • Emergency Unemployment Compensation Extension Act—Motion to Proceed

    by Senator Elizabeth Warren

    Posted on 2014-01-08

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    Read More about Emergency Unemployment Compensation Extension Act--Motion to Proceed

    WARREN. Mr. President, I rise to support the Truth in Settlements Act. This bipartisan legislation, which I introduced earlier today with my colleague from Oklahoma, Dr. Coburn, will help the public hold Federal agencies accountable for the settlements they make with corporate wrongdoers.

    I am honored to partner with Dr. Coburn on this bill. In his decade in the Senate, he has been a leader in the fight for greater government transparency. Dr. Coburn and I do not agree on every issue, but we strongly agree that sunlight is a critical component of good government. That is the motivation behind the Truth in Settlements Act, and I am proud to fight alongside Dr. Coburn to advance this legislation.

    When companies break the law, Federal enforcement agencies are responsible for holding them accountable. In nearly every instance, agencies choose to resolve cases through settlement rather than going to a public trial. The government agencies defend this practice by arguing that their eagerness to settle is in the best interests of the American people. But their actions paint a very different picture.

    If agencies were truly confident that these settlements were good deals for the public, they would be enthusiastic about publicly disclosing all of the key details of those agreements--hang it right out there so everyone can see what a great job they did on behalf of the American people.

    So is that what they do? No. Instead, time after time, agencies do the opposite, hiding critical details about their settlements in the fine print or, worse, hiding those details entirely out of public view.

    Copies of these agreements--or even the basic facts about the agreement--are not easily accessible online. Many agencies regularly deem agreements confidential without any public explanation. When agencies do make public statements about these agreements, they often trumpet large dollar amounts of money for the taxpayers. What they don't trumpet is that the companies often pay dramatically less than the ``sticker price''--through ``credits''--for engaging in routine activities or through potentially huge tax deductions.

    Add up all of these tricks and we end up with a predictable result: Too often the American people only see what the agencies want them to see about these agreements.

    These hidden details can make all the difference. When we dig below the surface, settlements that seem tough and fair can end up looking like sweetheart deals.

    For example, last year, Federal regulators entered into a settlement with 13 mortgage servicers accused of illegal foreclosure practices. The ``sticker price'' on the settlement was $8.5 billion--that is a really nice headline--but $5.2 billion of the settlement was in the form of credits, not in cash outlays. These credits were described in the government's press release as covering what they called ``loan modifications and forgiveness of deficiency judgments.'' So what does that mean? Well, it turns out the servicers could rack up those credits by forgiving mere fractions of large unpaid loans. So, for example, if a servicer wrote down $15,000 of a $500,000 unpaid loan balance, that servicer doesn't just get a $15,000 credit for the amount they wrote down, they get a credit for the whole $500,000--the full value of the loan. That method of calculating credits--buried in the fine print-- could end up cutting by more than half the overall value of the $8.5 billion settlement.

    Another way to hide the ball is to omit an upfront determination and disclosure of whether the settlement will be tax deductible. Several years ago, the Justice Department announced a $385 million settlement with Fresenius Medical Care for allegedly defrauding Medicare and other health programs for years. When the agreement was originally announced, the Justice Department touted the sticker price as the agency's largest civil recovery to date in a health care fraud case. But the DOJ didn't say a word about the tax treatment. The agency's failure to even consider that issue was a very costly mistake. By the time the company finished claiming all of its tax deductions from the settlement, it ended up paying $100 million less than originally advertised. In other words, the taxpayers picked up more than a quarter of the tab.

    It takes a lot of digging around to uncover these unflattering details, but at least it was possible to do so in these cases because of public information about these two agreements. For settlements that are kept confidential, the public is completely in the dark.

    Just last year, Wells Fargo agreed to pay the Federal Housing Finance Agency $335 million for allegedly fraudulent sales of mortgage-backed securities to Fannie Mae and Freddie Mac. That is about 6 percent of what JPMorgan paid in a public settlement with FHFA to address very similar claims. So in what ways did the actions of Wells Fargo differ from those of JPMorgan? We will never know, because the JPMorgan settlement is public, but the much smaller Wells Fargo settlement is confidential.

    The American people deserve better. Government enforcement agencies work for us, not for the companies they regulate. Agencies should not be able to cut bad deals and then hide behind their embarrassing details. The public deserves to know what is going on.

    The Truth in Settlements Act requires transparency. It requires agencies making public statements about their settlements to include explanations of how companies get credits and whether the wrongdoers will be eligible for tax breaks for their settlement payments. The bill also requires agencies to post text and basic information about their settlements online. And while the legislation permits confidential settlements, it requires agencies to disclose how frequently they are invoking confidentiality and to explain their reasons for doing so.

    If we expect government agencies to hold companies accountable for breaking the law, then we, the public, must be able to hold agencies accountable for enforcing the law. We can't do that if we are kept in the dark. The Truth in Settlements Act shines a light on these agency decisions, and it gives the American people a chance to hold [[Page S116]] agencies accountable for fairly and effectively enforcing our laws. I urge my colleagues to join us in supporting this bill.

    Thank you, Mr. President. I suggest the absence of a quorum.

    The PRESIDING OFFICER. The clerk will call the roll.

    The assistant legislative clerk proceeded to call the roll.

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