by Tom Fitton Remember at the outset of the financial crisis when the government told us only “healthy banks” were going to receive bailout funds? Well apparently that requirement does not apply to banks with friends in high places.
Judicial Watch received new documents from the U.S. Department of Treasury about the controversial $12 million bailout grant provided to Boston-based OneUnited Bank.
We got the documents through a Freedom of Information Act (FOIA) lawsuit we filed against Treasury. Included are internal Treasury emails describing the substandard condition of OneUnited prior to the taxpayer funded bailout, which allegedly occurred at the behest of Reps. Maxine Waters and Barney Frank.
Here’s what we found out in a nutshell: OneUnited Bank was in deep trouble due to incompetence and mismanagement. Government officials knew all about it. And yet, they bent the rules for Waters and Frank and “invested” taxpayer funds in the floundering enterprise.
Consider this September 15, 2008, email from former Treasury Senior Advisor Michael Scott to Director of the Office of Financial Institutions Mario Ugoletti. It includes a Community Reinvestment Act (CRA) evaluation administered by the Federal Financial Institutions Examination Council (FFIEC) noting serious issues with OneUnited’s lending practices:
2004 CRA Public Evaluation: While the institution received a CRA rating of “Low Satisfactory” on an overall basis, OneUnited Bank’s CRA rating for Massachusetts was “Needs to Improve” for both the Lending Test and the Investment Test. Under the Lending Test, the report stated that “OUB has done a poor job of meeting the credit needs of its [Boston, MA] assessment area. A review of the 2002 and 2003 HMDA data revealed a total of one loan. There were no reported Community Development Loans (CDL) and any innovative or flexible lending programs were apparently ineffective.” For the Massachusetts Investment Test, the report stated that “the level and complexity of investments within the Boston assessment area is less than satisfactory there were no equity investments or qualified deposits within the assessment area. The low volume of qualified investments within the assessment area is a concern.”A subsequent 2007 CRA evaluation noted continued problems with OneUnited’s lending program, particularly in Florida.
In Florida, the institution received a CRA rating of “Substantial Noncompliance” which also represented the subordinate rating for the Lending Test…
The documents also include a January 3, 2009, email from Brookly McLaughlin, Treasury’s Deputy Assistant Secretary for Public Affairs, to former Assistant Treasury Secretary Neel Kashkari highlighting Barney Frank’s intervention in the OneUnited Bank bailout and calling attention to significant concerns about the OneUnited transaction:
According to the WSJ [Wall Street Journal] Barney Frank told them that he specifically put section 103-6 in the bill in order to help this particular bank. Apparently this bank also had an issue with a Porsche that the regulators had made them get rid of. The story will run later this week and will highlight three banks that they think raise questions and are not “healthy” banks…(As I’ve noted previously, according to the January 22, 2009, edition of the Wall Street Journal, Treasury indicated it would only provide bailout funds to healthy banks to jump-start lending.)
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According to these documents, OneUnited sought government assistance in part because the company owned $52 million in Fannie Mae and Freddie Mac stock that was “irrevocably impaired” when the government seized control of the two GSEs. However, as noted by one Treasury email from Michael Scott, OneUnited “purchased their Fannie/Freddie stock in the first quarter of 2008,” long after the problems cited in the government’s two CRA assessments. The official commented, “Interesting, huh?”
Yes, it certainly is…
In light of these documents, I do not think there is any question that, if not for the corrupt intervention by Barney Frank and Maxine Waters, OneUnited would not have gotten a $12 million taxpayer bailout. And this so-called community bank wasn’t actually lending much to the “community” that Frank and Waters were purporting to help.
Today’s Washington Post adds more devastating detail to this scandal (and references documents first obtained by Judicial Watch). The paper reports that regulators knew that OneUnited could not get aid under law. So Frank, for Waters, inserted a provision into the TARP legislation designed to help OneUnited. But that wasn’t enough because the bank was so poorly run. And the rules were bent further:
Still, OneUnited did not meet the normal threshold for obtaining TARP money. As the inspector general for the TARP program, Neil M. Barofsky, said in a 2009 report that referred to OneUnited’s troubles without citing its name, the bank had not met five metrics, indicating it was not adequately capitalized.The Obama administration has thus far produced 639 pages in response to Judicial Watch’s FOIA investigation of the Waters/Frank bailout scandal. But they’re still keeping 203 pages under lock and key. It is not hard to see why.
Moreover, the FDIC, in a memo to the Treasury Department analyzing its TARP application, warned explicitly that the bank was in a “precarious financial position”…
But a committee of regulators and a group of top Treasury officials then departed from customary practices. They did so even though one Treasury member said that “he was very concerned about this bank,” according to Barofsky’s report.
The report said these reviewers decided that the bank’s viability could be assessed “with applied-for TARP funds taken into account” as an existing capital asset on its balance sheet. In short, the reviewers assessed the bank as though it already had the money, to make it eligible for the aid.
The resulting $12 million boost to OneUnited’s bottom line – again without a penny moving anywhere – finally allowed it to look healthy enough to win the loan…
For politicians, reporters, and political consultants trying to figure out the Tea Party and why so many Americans are angry at Washington corruption – they might want to look at this corrupt mess in TARP uncovered by Judicial Watch.
Big Government
