Banking Law

Save The Economy, Screw The Poor

The Austin-Statesman points out one of the many unintended consequences of federal government's deft management of monetary policy: the diminishing funding for legal services for the poor.

Rock-bottom interest rates, part of the Federal Reserve's attempt to prop up a crumbling economy, are having an unintended but devastating impact on legal programs for the poor.

Nonprofit groups in Texas are bracing for layoffs and massive cuts to their client lists in 2010 as the biggest source of legal aid funding ? the interest on $1.1 billion in bank accounts in which lawyers deposit their clients' money ? has all but disappeared as rates have plummeted.

Annual grants are expected to fall by at least 75 percent next year for agencies that address life-altering legal problems, including consumer scams, child-custody disputes, home foreclosures, missing child support, improper institutionalization and many other noncriminal issues.

[...]

Interest on lawyer bank accounts is diverted into legal aid programs based on the federal funds rate, which peaked at 5.25 percent in 2007 and raised $20 million that year.

This year, legal aid programs will be lucky to get $1.5 million as the federal rate has plunged to a range between 0.00 percent and 0.25 percent.

"You see it coming and it's like, God, what are we going to do?" said Richard LaVallo, a lawyer for Advocacy Inc., which helps people with disabilities.

Asking God (once known by the quaint term "praying") is likely the best option, Mr. LaVallo. God loves the poor a lot more than he loves "scribes," so I'd start with Him and see what happens. Not that good old Texas legislators aren't trying their best to find alternative funding sources, however, sources that would occur only to Texans.

Legal aid officials will turn to the Legislature for help, but it's a tough budget year, with early estimates seeing an almost $4 billion shortfall.

Still, the Senate Finance Committee directed the Texas Supreme Court to compile ideas for finding more legal aid money. Raising courthouse filing fees and getting a portion of the tax on sexually oriented businesses, or the "pole tax," are under discussion.

There is something so appropriate about using a "pole tax" to fund lawyers, isn't there? I love this state.

Full post as published by Bank Lawyers Blog on February 22, 2009 (boomark / email).