The article incorrectly said that Rep. Maxine Waters (D-Calif.) had arranged a meeting between federal regulators and OneUnited of Massachusetts, a bank in which her husband held shares. Waters arranged a meeting between regulators and the National Bankers Association, whose chairman was the general counsel of OneUnited and who attended the meeting along with the bank's chief executive. A person at the meeting said the discussion focused on OneUnited.
After Call From Senator Inouye's Office, Small Hawaii Bank Got U.S. Aid
Wednesday, July 1, 2009
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.
Many lawmakers have worked to help home-state banks get federal money since the Treasury announced in October that it would invest up to $250 billion in healthy financial firms. But the Inouye inquiry stands apart because of the senator's ties to Central Pacific. While at least 33 senators own shares in banks that got federal aid, a review of financial disclosures and records obtained from regulatory agencies shows no other instance of the office of a senator intervening on behalf of a bank in which he owned shares.
Inouye (D-Hawaii) declined a request for an interview but acknowledged in a statement that an aide had called the FDIC to ask about Central Pacific's application. Inouye said he was not attempting to influence the outcome. The statement did not address Inouye's personal role in the inquiry, including whether he directed the aide to make the call or knew at the time that it had been made.
Even if Inouye were directly involved, it would not violate the rules the Senate sets for itself, experts said.
Both the FDIC and the Treasury said the decision was not affected by the involvement of Inouye's office.
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.
Central Pacific was founded in 1954 by a group of World War II veterans including Inouye who were emerging leaders in Hawaii's Japanese American community.
"The time had come to fund a bank that could provide equitable service not only to the Japanese, but to all communities," Inouye is quoted as saying in an exhibit in the lobby of one of the company's Honolulu branches. Inouye, who became the bank's first secretary, said that he initially invested $3,000, the minimum amount possible.
Central Pacific is Hawaii's fourth-largest bank, holding about 15 percent of the state's deposits. In recent years, it increasingly used the money to make loans in California, funding several large residential developments. By last year, the bank was facing the consequences of California's collapsing housing market. In July , Central Pacific reported a quarterly loss of $146 million, matching its total profit in the previous three years.
In October, shortly after the government announced that it would invest billions of dollars in banks to spur new lending, Central Pacific submitted an application under the initiative, called the Troubled Assets Relief Program, or TARP.