In 2011, President Obama announced a goal of putting one million electric vehicles on the road. To this end, he twice went to Congress seeking funds for electric vehicle infrastructure. Both times, however, Congress demurred. Thus rebuffed, the Obama administration turned to other means to achieve his preferred policy. In late 2016, the Justice Department and the Environmental Protection Agency reached a partial settlement with Volkswagen over “Dieselgate,” which required the automaker to invest $1.2 billion on electric vehicle infrastructure—almost four times what the president unsuccessfully had sought from Congress. The upshot is that the Obama administration leveraged its prosecutorial discretion to perform an end-run around Congress’s power of the purse. More broadly, Obama’s EPA routinely resorted to these slush fund settlements to fund green energy projects, as I discussed in a 2017 study for the Competitive Enterprise Institute.

The Obama administration reached similar settlements in enforcement actions against financial institutions after the 2008-09 financial crisis. For example, as part of the Justice Department’s 2014 settlement with Citigroup, the bank had to pay $25 million to progressive non-profit groups. And in a $16 billion settlement with the government, the Bank of America agreed to pay $50 million to progressive non-profits. In return for making these payments, the banks faced smaller fines. In this manner, the Obama administration used regulatory enforcement to strongarm banks into rewarding political allies of the White House.

Lawmakers took note. During the 114th Congress, former Rep. Bob Goodlatte, who chaired the Judiciary Committee at the time, introduced the Stop Settlement Slush Funds Act. As should be evident from the bill’s title, the purpose of the legislation was to stop the executive branch from abusing its enforcement authority to fund pet projects. Rep. Goodlatte championed the bill in hearings, and, ultimately, the legislation won a comfortable majority in the House of Representatives. But the bill died on the vine in the Senate after Trump won the presidency.

To its credit, the Trump administration acted unilaterally to curb these slush fund settlements. In early 2017, then-Attorney General Jeff Sessions issued a memo that prohibited Justice Department lawyers from participating in settlements that involve third-party payments. In December of 2020, the agency codified the Sessions memo into the Code of Federal Regulations.

Alas, what can be done by one presidential administration can be undone by the next. On his first day in office, President Biden ordered the Justice Department to review his predecessor’s policy on third-party payments in settlement agreements. Yesterday, the agency complied with the president’s directive. Specifically, the agency issued an “interim rule” that rescinds the Trump-era policy. Although the rule is effective immediately, the agency is taking public comment on the measure.

What’s next? Well, it certainly seems that the Biden administration is keen on resuming the Obama-era practice of using regulatory enforcement to fund policy preferences outside of the legislative appropriations process. We’ll be paying attention to this space, so stay tuned.

If, as many expect, the next (118th) Congress features new majorities in both chambers, then perhaps lawmakers will revisit the Stop Settlement Slush Funds Act, versions of which have been introduced in the House and Senate by Rep. Lance Gooden (H.R. 5773) and Sen. Tommy Tuberville (S. 2079). 

For more on these slush fund settlements: