January 26, 2009
The reduction of the federal funds rate was viewed by many businesses, interest groups, and politicians as a good thing. A way to inject some confidence into the economy and a way to stave off further economic turmoil. In an odd and perhaps unintended consequence of the cut of these interest rates, legal aid services around the country have been hit hard and are being forced to cut back services and staff, in many instances up to 20%.
Reported by the New York Times just a week ago, legal aid services had benefited greatly from the revenue from the interest rates that have now been cut. “Legal aid groups have long benefited from little-known programs that draw interest earned from short-term deposits that lawyers hold in trust for clients during, for example, real estate transactions or personal injury payouts. The interest is mainly donated to legal services for the poor.”
The article highlights this situation through the story of boat technician Jim Vedrani of Massachusetts, who was let go from his job and subsequently started to receive unemployment benefits. He soon found work on a farm but quickly left after finding his boss emotionally abusive. He applied to have his unemployment benefits reinstated but lost–in large part because the legal aid organization he wanted to enlist to defend him, Neighborhood Legal Services, did have the manpower to defend him.
To read the article in full, click here.