Reason has been covering this issue for decades, and they agree:
Big, huge news on the civil asset forfeiture front: Eric Holder is ordering an end to most of the Department of Justice’s Equitable Sharing Program. This is the program where the DOJ works with local law enforcement agencies for busts, and then the law enforcement agencies are permitted to keep 80 percent of the assets seized. It has been an incubator of the worst police abuses, as some agencies looked for any possible reason to take people’s property without ever actually accusing them with a crime.
The federal program is what encouraged the police abuse because the agencies got to keep the money (and cars, and whatever else they snatched). When the money goes into the general fund, not directly to the police, there goes the incentive for police to grab whatever they can get their hands on.
It's one small, but very important step towards reining in our dangerously bloated government. May it be the first of many more!
UPDATE: Unfortunately, I and others were too quick to enthuse over this news. Reader "Matthew Grech" offers a link to Reason.com that analyses the fine print and concludes that Holder's order will only result in a modest reduction in seizures. But however small, at least it is a move in the right direction.
UPDATE (2): I'm really regretting having made this post. As Cato points out, Holder has taken steps to make it even easier for the government to seize the property of citizens "suspected" of engaging in criminal activity.