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OneUnited Bank received special treatment beyond what was disclosed

The House ethics committee announced that Rep. Maxine Waters (D-Calif.) will face trial for her role in steering federal funds to a bank to which she is personally connected. She denies any wrongdoing. Her career in photos:

She said Cohee digressed to urge officials to provide a $50 million bailout for his bank. "He said, 'I just need you all to make us whole.' And I think people in the room just looked at him. It was a really different request."

After Cohee left, Thompson stayed behind with other regulators. "They were, like, surprised to be called over there for that," she said. "I've never heard of anything like that before. It's almost like open bank assistance, and there's a law that prohibits that."

Told of Thompson's remarks, Cohee said he could not discuss his interaction with regulators. He said the bank's decision not to pay the dividends demanded of all TARP grantees was "consistent with safe and sound banking practices" and the terms of OneUnited's contract, which gives the bank authority to withhold all such payments.

Waters has said that her only additional involvement with OneUnited's relief appeal came weeks later, when she mentioned its plight to Frank, whose Financial Services Committee oversees the FDIC and the Treasury Department.

Frank has said he recalls Waters coming to him with a "predicament." She was concerned about helping OneUnited because of her husband's prior board service but did not mention any stock holdings, he said.

He advised her to "stay out of it" and said that his staff would pursue the relief request because OneUnited - which was not in his district - "was a Boston bank and he had a commitment to minority banks," the ethics committee quoted him as saying.

Frank told a committee aide to raise the issue of ensuring that OneUnited and similar banks were eligible for assistance at a meeting with Treasury Secretary Henry M. Paulson Jr., while other aides contacted the FDIC. The department was "looking underneath sofa cushions" to try to help the bank, one aide told another in an e-mail on Sept. 19, but it lacked legal authority.

In late September, OneUnited's counsel suggested to a Waters aide that if Treasury declined the bank's request, there might be a "legislative solution." Frank subsequently inserted a provision into the TARP legislation to help the bank. He emphasizes that it was different from the direct payment OneUnited sought. It more generally authorized assistance to institutions serving low-income populations that lost significant capital from the Fannie and Freddie stock devaluation. No hearings were held on the bill, which President George W. Bush signed into law on Oct. 3, 2008.

The stated aim of the TARP program was to invest up to $250 billion in what the Treasury Department said were "healthy, viable" banks that needed extra capital to sustain more aggressive lending.

OneUnited promptly applied for a grant, and a special counsel in Frank's office in Newton, Mass., started calling Treasury officials, including Neel Kashkari - then the top official responsible for approving such grants. "BF is interested and may call" the Treasury secretary about it, one of the officials warned Kashkari and others in an Oct. 17 e-mail. "Maxine Waters is interested in the bank as well."

Ten days later, in what officials say was part of a deal negotiated with OneUnited, the FDIC formally issued a public cease-and-desist order charging the bank with lax lending standards, paying excessive executive compensation, and "committing violations of law and regulations."


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