The Durability of Legislative Benefits and the Role of the Executive Branch's Settlement Authority
Journal of Private Enterprise, Vol. 34 (1), 2019
16 Pages Posted: 15 Feb 2018 Last revised: 22 Apr 2019
Date Written: February 2, 2018
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.
Keywords: Separation of Powers, Contractual Durability, Rent Extraction, Administrative State, Bank Settlements
JEL Classification: D72, D73, H27, P16
Suggested Citation: Suggested Citation