Whenever politicians propose to spend massive amounts of money, they tell us how it will benefit the public — but usually they concern themselves with more personal benefits. The ability to spend or withhold funds gives incumbent politicians great power, both within the federal government and with the network of lobbyists and contributors. Those people cling to those who hold the pursestrings, directly or indirectly, in the hopes of winning cash from big government expenditures. In return, they work to keep friendly incumbents in power for as long as possible, to keep the cash cow milking.
The latest example of this kind of corruption comes, not surprisingly, from the massive bank bailouts — and Senator Daniel Inouye is the latest politician pulling strings on behalf of … well, himself:
Sen. Daniel K. Inouye’s staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm’s losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn’t meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye’s office, Central Pacific announced that the Treasury would inject $135 million. …
Inouye reported ownership of Central Pacific shares worth $350,000 to $700,000, some held by his wife, at the end of 2007. The shares represented at least two-thirds of Inouye’s total reported assets. Inouye has requested a delay in filing his annual financial disclosure for 2008, which was due this spring, and he declined to provide the current value of his investment. Since the end of 2007, the bank’s stock has lost 79 percent of its value.
In other words, Inouye interceded to get TARP funds to secure his personal assets. He used his political clout on Capitol Hill to get Treasury to approve a “marginal” application that had already been rejected once, in order to save his own bank from collapse. Central Pacific had already been in trouble with the FDIC even before the collapse in the lending and financial sector, thanks to bad management practices and undercapitalization. The FDIC had required a change in management and $40 million more in capitalization, which is why Treasury was reluctant to give CP a bailout check in the first place.
Inouye isn’t the first member of Congress to have used TARP to rescue personal fortunes. Maxine Waters did the same thing with OneUnited of Massachusetts, where she and her husband had significant investments. In that case, Waters arranged a meeting between OneUnited and regulators, while Barney Frank wrote legislation that required Treasury to grant special consideration to OneUnited’s TARP application.
When the Keating Five scandal occurred, it involved Senators intervening with regulators to protect a campaign contributor. Now we have politicians raiding the Treasury for personal profit. Both are corruption, but this is exponentially worse — and yet, have we seen Nancy Pelosi or Harry Reid lift a finger to stop this “culture of corruption”?