Maxine Waters' questionable ethics
THE FEDERAL Troubled Assets Relief Program (TARP) was costly but necessary -- and successful. Still, federal aid to banks is never risk-free; one danger is the appearance, or reality, of political manipulation. With the Office of Congressional Ethics' announcement Monday of formal charges against the House Financial Services Committee's No. 3 Democrat, Rep. Maxine Waters (Calif.), this risk has materialized.
Before TARP was created -- but while the Bush administration was working with Ms. Waters's committee on the financial crisis -- Ms. Waters pressed Treasury Secretary Henry M. Paulson to meet with African American bankers. The topic was to be the federal takeover of Fannie Mae, which had wiped out millions of dollars in Fannie Mae stock held by minority-owned banks.
Mr. Paulson made top aides available, expecting a discussion of black-owned banks' plight generally. Instead, the meeting, on Sept. 9, 2008, was dominated by representatives of OneUnited Bank, who asked for direct aid to their bank and others. This was awkward, to say the least: Ms. Waters's husband was a major shareholder and had been a board member of OneUnited. Ms. Waters herself is a former shareholder. After the meeting, Mr. Paulson pointedly told Ms. Waters that he had expected a "larger turnout."
Ms. Waters seems to have realized this might not look entirely proper. According to the ethics office's report -- which was prepared a year ago -- she told the Financial Services Committee chairman, Rep. Barney Frank (D-Mass.), that she was in a quandary as to how to handle OneUnited's pleas for help. Mr. Frank urged her to let him handle the matter, although it's not clear whether the two spoke before or after the meeting at Treasury. In any case, Mr. Frank inserted language into the TARP bill, signed by President George W. Bush on Oct. 3, 2008, enabling OneUnited to draw $12 million in aid.
For all its connections to Ms. Waters and Mr. Frank, OneUnited was not necessarily the likeliest candidate for a bailout. It had a mixed record of lending to minority communities and had run afoul of regulators for buying its executives a Porsche. OneUnited has missed all but one of six scheduled dividend payments to the Treasury. Mr. Frank has never denied his role and has said he acted to prevent the Fannie Mae collapse from bringing down a minority-owned institution based partly in his state.
Ms. Waters denies wrongdoing. We can't say yet whether she technically violated House Rule 23, which forbids members from using their influence for personal profit. But this sure has an unethical whiff to it. Ms. Waters never should have called Mr. Paulson. Nor should she have approached Mr. Frank. And given what's happened since, the committee chairman probably should have kept out of the case himself. Certainly taxpayers would have been better off if he had.