Maxine Waters and the Democrats may have thought that all of the bad news from her intervention with OneUnited bank had already been aired, but the Washington Post reports that the House Ethics Committee only scratched the surface. Far from a single intervention by Waters, the record shows an unprecedented effort conducted by Congress, Treasury, and its regulators to rescue the bank in which Waters’ husband had invested a significant amount of money. In 707 applications of TARP money, OneUnited got the most special attention:
From the moment Boston-based OneUnited Bank began seeking a federal bailout in the summer of 2008, it received special treatment that went beyond what the Treasury Department or the bank and its political supporters have previously disclosed.
Congress adjusted the law and regulators broke with customary practices, despite an explicit internal warning that the bank was in financial trouble. Among other exceptions, the bank was allowed to count as part of its capital $12 million in federal bailout money – before the aid arrived.
OneUnited was the only bank to receive all of these considerations among the 707 recipients of money from the Troubled Assets Relief Program, according to documents and interviews.
Guess where that has left the American taxpayer? Holding the bag. OneUnited has failed to repay its TARP funds on time, one of only a “handful” of banks to go into arrears, according to the Post. Clearly, strings got pulled to rescue OneUnited despite its risky status.
How did those strings get pulled? The FDIC had a secret program to identify banks that had the potential of “unnecessary press or public relations” problems. That was apparently shorthand for banks that had connections to public officials. If that sounds familiar, think of Countrywide’s “Friends of Angelo” program for giving special low-cost mortgages to people like Chris Dodd and Jamie Gorelick in order to build influence. The FDIC and Treasury insists that they didn’t treat OneUnited any differently, but the existence of the FDIC program — and all of the exceptional treatment OneUnited received — strongly suggests that the rescue was politically motivated.
The Post reviews the intervention sequence. After Waters came to Frank for help, without mentioning (according to Frank) that her husband still held a stake in the bank, Frank, Treasury, and the FDIC flew into action:
Frank told a committee aide to raise the issue of ensuring that OneUnited and similar banks were eligible for assistance at a meeting with Treasury Secretary Henry M. Paulson Jr., while other aides contacted the FDIC. The department was “looking underneath sofa cushions” to try to help the bank, one aide told another in an e-mail on Sept. 19, but it lacked legal authority.
In late September, OneUnited’s counsel suggested to a Waters aide that if Treasury declined the bank’s request, there might be a “legislative solution.” Frank subsequently inserted a provision into the TARP legislation to help the bank. He emphasizes that it was different from the direct payment OneUnited sought. It more generally authorized assistance to institutions serving low-income populations that lost significant capital from the Fannie and Freddie stock devaluation. No hearings were held on the bill, which President George W. Bush signed into law on Oct. 3, 2008. …
OneUnited promptly applied for a grant, and a special counsel in Frank’s office in Newton, Mass., started calling Treasury officials, including Neel Kashkari – then the top official responsible for approving such grants. “BF is interested and may call” the Treasury secretary about it, one of the officials warned Kashkari and others in an Oct. 17 e-mail. “Maxine Waters is interested in the bank as well.”
Ten days later, in what officials say was part of a deal negotiated with OneUnited, the FDIC formally issued a public cease-and-desist order charging the bank with lax lending standards, paying excessive executive compensation, and “committing violations of law and regulations.”
Three days later, with OneUnited slated to issue a key quarterly report, the FDIC’s five board members voted unanimously to exempt the bank from a 1995 accounting rule that binds every other bank under the agency’s jurisdiction. In doing so, they cited the authority provided under Frank’s amendment.
How convenient! And the FDIC board members all knew of Waters’ connection to the bank — but claim that it didn’t influence their decision. Riiiiiight.
Be sure to read the entire, extensive report by R. Jeffrey Smith at the Post.