Thursday, July 2, 2009
AS FEDERAL intervention in the troubled U.S. economy has grown, so has the need for "transparency": that is, full disclosure of, and accountability for, governmental allocations of taxpayer money. When the Bush administration came to Congress last fall seeking practically unbridled power to spend $700 billion on a rescue for the financial system, lawmakers balked until they got transparency -- in the form of multiple reporting requirements and expert oversight. The rules are supposed to prevent abuses by the firms that get the cash and the executive branch officials who give it to them. But Congress did not legislate transparency for its own members' manipulation of the bailout fund, known as the Troubled Assets Relief Program, or TARP.
And so we have the news, first reported in The Post yesterday by Paul Kiel of ProPublica and Post staff writer Binyamin Appelbaum, that the Treasury Department steered $135 million in TARP money to a bank in Hawaii after Sen. Daniel K. Inouye's staff contacted bank regulators on its behalf. Mr. Inouye, a Democrat, is Hawaii's senior senator. Nothing unusual so far: Members of Congress have been lobbying for home-state banks almost since TARP started -- so much so that congressional influence is the subject of a TARP inspector general report due out this summer. In one prominent case, Rep. Maxine Waters (D-Calif.) arranged a meeting between regulators and OneUnited of Massachusetts, a bank in which her husband held shares. Rep. Barney Frank (D-Mass.) later wrote language into the bailout bill that effectively directed the Treasury to give special consideration to OneUnited, and he followed up with a call to Treasury. The bank got $12 million.
If anything, Mr. Inouye's situation looks even more dubious. He was a founder of the institution in question, Central Pacific Financial. As of the end of 2007, he and his wife had several hundred thousand dollars tied up in the bank's stock. On the merits, the case for a TARP loan to Central Pacific was not strong. TARP was meant to shore up healthy banks. But Central Pacific was bleeding capital because of bad real estate loans. Its primary regulator, the Federal Deposit Insurance Corp., considered it a marginal TARP candidate.
Mr. Inouye says that his staff's involvement consisted of a single phone call to the FDIC and that he was not attempting to influence the outcome. But he has yet to say whether his aide acted on his instructions. (His office declined further comment yesterday.) Mr. Inouye, 84, is a distinguished veteran of the Senate who literally gave his right arm fighting for his country in World War II. All the more reason to be disappointed by this development. Members of Congress must avoid even the appearance of manipulating TARP for the benefit of favored constituents, much less themselves. So far, their efforts have been transparently insufficient.