OneUnited received even more special treatment than disclosed
Friday, September 17, 2010
From the moment Boston-based OneUnited Bank began seeking a federal bailout in the summer of 2008, it received special treatment that went beyond what the Treasury Department or the bank and its political supporters have previously disclosed.
Congress adjusted the law and regulators broke with customary practices, despite an explicit internal warning that the bank was in financial trouble. Among other exceptions, the bank was allowed to count as part of its capital $12 million in federal bailout money - before the aid arrived.
OneUnited was the only bank to receive all of these considerations among the 707 recipients of money from the Troubled Assets Relief Program, according to documents and interviews.
A close look at how OneUnited - which is now at the center of an ethics investigation involving Rep. Maxine Waters (D-Calif.) - won bailout money shows how the Treasury Department, federal regulators and another influential lawmaker helped it despite its record of bad investments and extravagant spending.
A few internal warnings sounded by regulatory analysts now seem prescient, because OneUnited is one of only a handful of banks that have failed to make six promised TARP dividend payments to the government, in this case totaling $904,000. Its chairman, Kevin L. Cohee, said in an interview that this decision was "consistent with safe and sound banking practices" and that its TARP contract permitted withholding all dividends.
A Washington Post review of documents and interviews with many involved in the decisions show that regulators flagged the bank early on for its "highly visible" connection - in OneUnited's case, a former board member who is married to Waters, the chairman of an important banking subcommittee. The alert was part of a previously undisclosed practice at the Federal Deposit Insurance Corp. of trying to identify banks that might cause "unnecessary press or public relations" problems, according to testimony a top FDIC official gave to House ethics investigators.
Then, the bank won a rare chance to make its case for help to top Treasury Department officials, a meeting requested by Waters. When it became clear that the bank did not qualify, House Financial Services Chairman Barney Frank (D-Mass.) sponsored a legislative provision encouraging officials to provide special relief for banks such as OneUnited. Other favorable considerations followed.
Waters has said she did not violate any House rules. Her aides have said that OneUnited's TARP award followed a routine review and was not influenced by politics. Lori Bettinger, the TARP program's deputy director, similarly said in a January 2009 e-mail to colleagues that OneUnited qualified for its award under the same terms "used for all applicants."
A little-noticed report last year by a Treasury inspector general reached a different conclusion. It said that the review was irregular but that the decision appeared to have been based on "mitigating factors," rather than political pressure.
FDIC spokesman Andrew Gray, responding to questions, said that "OneUnited was going to fail" and that the agency stepped in "to avert a costly failure." He said Waters's known link to the bank had no impact on the agency's actions. Treasury spokesman Mark Paustenbach similarly called the review process "thorough" and insulated from "undue influence."
Cohee responded that "OneUnited received the TARP [award] based on the merits of its past performance and its future prospects." He added that the bank is not troubled and didn't need the award "to prosper."