Needy States Use Housing Aid Cash to Plug Budgets

May 29, 2012

In the second largest settlement ever between a corporation and state governments (falling behind only big tobacco), Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally banks awarded $25 billion for their respective abuses in the home mortgage market.  The money was meant to be used to alleviate the hardships of customers throughout the country, says the New York Times.

Now, however, it seems that a fair portion of this sum will be allocated to other purposes.  Of the total, $2.5 billion was divvied among the state governments in the hopes that they would use them for programs to help residents in need.  Yet this admirable goal seems to exist only on paper.

  • In Texas, $125 million went straight to the general fund.
  • Missouri will use its $40 million to soften cuts to higher education.
  • Indiana is spending more than half its allotment to pay energy bills for low-income families.
  • Virginia will use most of its $67 million to help revenue-starved local governments.
  • Georgia, where home prices are still falling, will use its $99 million to attract new companies.
  • Though it has not made a final decision, California Governor Jerry Brown has proposed using his state's $400 million to plug budgetary shortfalls.
  • Arizona will spend about half its $97 million to fund prisons.

Some states, on the other hand, will in fact use their funds for their intended purpose.

  • New York will spend $15 million in settlement money for housing counseling and legal assistance, and plans to spend the bulk of its $130 million on similar programs.
  • North Dakota will use its tiny allotment, $1.9 million, to provide housing to police officers and emergency responders in its booming oil-field counties.
  • Ohio has created a sweeping plan to demolish abandoned properties.

All in all, only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group.  About 15 states have said they will use all or most of the money for other purposes.

Source: Shaila Dewan, "Needy States Use Housing Aid Cash to Plug Budgets," New York Times, May 15, 2012

For text:

http://www.nytimes.com/2012/05/16/business/states-diverting-mortgage-settlement-money-to-other-uses.html?_r=2&smid=li-share

 

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