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Apocalypse
09-19-2010, 12:22 PM
OneUnited received even more special treatment than disclosed

By R. Jeffrey Smith
Friday, September 17, 2010; A1

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 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…

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 sought the meeting on behalf of a group of minority lenders that Cooper had been tapped to chair, not just OneUnited. Cooper began the meeting by noting that minority-owned institutions were "devastated" by the Fannie and Freddie stock devaluation.

Thompson, however, was dubious. She recalled that she had looked into the issue beforehand and learned that only two minority banks were harmed, OneUnited and a smaller Texas institution…

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." …

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."

Three days later, with OneUnited slated to issue a key quarterly report, the FDIC’s five board members voted unanimously to exempt the bank from a 1995 accounting rule that binds every other bank under the agency’s jurisdiction. In doing so, they cited the authority provided under Frank’s amendment.

Two FDIC officials said that when the board members voted, they all knew of the bank’s link to Waters. But they denied it influenced their decisions, the officials said…

Still, OneUnited did not meet the normal threshold for obtaining TARP money. As the inspector general for the TARP program, Neil M. Barofsky, said in a 2009 report that referred to OneUnited’s troubles without citing its name, the bank had not met five metrics, indicating it was not adequately capitalized.

Moreover, the FDIC, in a memo to the Treasury Department analyzing its TARP application, warned explicitly that the bank was in a "precarious financial position" – a statement seemingly at odds with the TARP program’s stated claim of assisting only healthy and viable banks.

But a committee of regulators and a group of top Treasury officials then departed from customary practices. They did so even though one Treasury member said that "he was very concerned about this bank," according to Barofsky’s report.

The report said these reviewers decided that the bank’s viability could be assessed "with applied-for TARP funds taken into account" as an existing capital asset on its balance sheet. In short, the reviewers assessed the bank as though it already had the money, to make it eligible for the aid.

The resulting $12 million boost to OneUnited’s bottom line – again without a penny moving anywhere – finally allowed it to look healthy enough to win the loan, which Kashkari approved in late November…

This is our "Honest" gov. at work.

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/16/AR2010091607163.html?wprss=rss_print/asection