By Binyamin Appelbaum
Washington Post Staff Writer
Saturday, March 14, 2009
A California congresswoman who this fall helped a bank partly owned by her husband seek government money has said she previously intervened with federal regulators to help clear the way for that bank to buy another firm.
Rep. Maxine Waters (D-Calif.) has said she arranged a September meeting at the Treasury Department, where executives of OneUnited Bank of Massachusetts asked the government for money. In December, Treasury selected OneUnited, the nation's largest minority-owned bank, as an early participant in the bank bailout program, injecting $12.1 million.
Waters's husband, Sidney Williams, until recently sat on OneUnited's board of directors and owned company shares worth at least $500,000.
Waters said yesterday that both the investments and her advocacy were rooted in a commitment to minority-owned banks. She noted that she has disclosed her financial ties to OneUnited in required annual filings. And she said her actions this fall were intended to benefit all minority-owned banks.
Responding to articles in the New York Times and the Wall Street Journal about her role in setting up the Treasury meeting, Waters said in a statement, "These articles have revealed only one thing: I am indeed an advocate for minority banks."
Waters's involvement with the bank dates at least to 2001, when the company, then called Boston Bank of Commerce, bought a minority-owned institution based in Los Angeles. Waters's husband owned shares in the latter firm and, after the acquisition, became a shareholder in Boston Bank of Commerce, according to Waters's congressional financial disclosure files.
The following year, Boston Bank of Commerce tried to buy a second minority-owned bank in Los Angeles. But that Los Angeles bank decided to sell to a bank from Illinois. Waters tried to block the deal. She said she did so because the Illinois bank was not minority-owned, and she argued publicly that the Los Angeles bank should remain minority-owned.
Waters said she contacted regulators at the Federal Deposit Insurance Corp. to see whether the merger could be staved off.
"And I want you to know that I was involved in reaching out to the FDIC in particular when there was another bank that was about to be acquired by a major white bank out of Illinois," Waters said at a congressional hearing in 2007. "And basically, I was told that there was nothing that could be done."
Waters and other community leaders launched a campaign of public pressure that proved more successful. The Los Angeles bank, Family Savings, ultimately agreed to be acquired by Boston Bank of Commerce. The combined company renamed itself OneUnited.
In 2004, Waters and her husband both bought new shares in OneUnited. Waters sold her investment after half a year, according to her annual financial disclosure, but Williams maintained an investment and joined the company's board of directors. He remained on the board until recently.
Waters disclosed in May 2008 that her husband held two investments in OneUnited at the end of 2007, each valued at between $250,000 and $500,000. She reported that the investments had produced income of as much as $65,000 during 2007. Members of Congress have not yet filed financial disclosures for 2008, but Waters said in her statement yesterday that her husband remains an investor in the company.
Waters's advocacy is part of a broader pattern in which members of Congress have pressed Treasury to invest in their local banks, in part because of frustration with Treasury's slow and secretive selection process. Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, also pressed regulators to help OneUnited.
Waters's recent efforts on behalf of OneUnited began in September, when the government took control of mortgage financiers Fannie Mae and Freddie Mac, wiping out the companies' shareholders. Hundreds of banks held those shares as investments, a practice that was encouraged by regulators. The holdings were particularly common among banks that focus on community development, a category that includes many minority-owned banks.
The losses left some, including OneUnited, with less than the amount of capital required by regulators in their financial reserves.
Waters has acknowledged she arranged a meeting between Treasury officials and a group that represents minority- and women-owned banks, the National Bankers Association. A person who attended said the discussion focused on OneUnited, which had lost about $50 million.
In attendance was the chairman of the NBA, who was also the general counsel at OneUnited. The company's chief executive, Kevin Cohee, also was there. They wanted the government to replace the bank's loss, according to a letter NBA sent to Treasury.
Treasury officials say they had granted the meeting at Waters's request, and they were not aware at the time of her ties to OneUnited.
The following month, Congress gave Treasury $700 billion to aid the banking industry. OneUnited got a boost from Frank, who included language in the legislation directing Treasury to consider helping the bank. The bank does not operate in Frank's district, but he said he inserted the language because aiding the only minority-owned bank in Massachusetts was right. Frank said he also called regulators to urge support for the company.
On Dec. 19, Treasury agreed to invest $12.1 million in OneUnited, provided the bank raised $20 million from private investors.
Treasury officials said the advocacy did not affect their decision. Neel Kashkari, the senior Treasury official overseeing the financial rescue program, testified this week before Congress that the decisions to aid banks were made on the merits of their cases. He maintained that the process has not been subject to "undue influence."
During the same period, Treasury chose not to invest in a Virginia bank crippled by the takeover of Fannie and Freddie. Gateway Financial Holdings of Virginia Beach lost $37.4 million on its investment in preferred shares in the two companies. The company applied for Treasury's bailout program but did not receive any money. At the end of December, Gateway sold itself to a local rival, Hampton Roads Bankshares.
Staff writer David Cho contributed to this report.