My own comments and some anecdotes
follow this well-researched -and thoroughly
-believable- story which is co-written by
ProPublica
The Washington Post,
This story is running on the front page
of The Post on Wednesday morning.
In case you haven't seen the prior
ProPublica pieces I've run here
in the past, here is the Reader's
Digest version of who they
are and what they're about:
"ProPublica is an independent,
non-profit newsroom that produces
investigative journalism in the public
interest. We strive to foster change
through exposing exploitation of the
weak by the strong and the failures
of those with power to vindicate the
trust placed in them."
Got the picture?
-----------------
ProPublica
After Call From Senator Inouye’s Office, Small Hawaii Bank Got U.S. Aid
Central Pacific Financial, Hawaii's fourth-largest bank, was approved for $135 million in bailout funds shortly after Senator Daniel Inouye's (D-Hawaii) office made a call to the bank's regulator. Inouye, who reported owning Central Pacific shares worth $350,000 to $750,000 in 2007, denies attempting to influence the process (Getty Images file photo).
This story was published in the Washington Post on July 1, 2009.
Sen. Daniel K. Inouye's staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm's losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn't meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye's office, Central Pacific announced that the Treasury would inject $135 million.
Many lawmakers have worked to help home-state banks get federal money since the Treasury announced in October that it would invest up to $250 billion in healthy financial firms. But the Inouye inquiry stands apart because of the senator's ties to Central Pacific. While at least 33 senators own shares in banks that got federal aid, a review of financial disclosures and records obtained from regulatory agencies shows no other instance of the office of a senator intervening on behalf of a bank in which he owned shares.
Inouye (D-Hawaii) declined a request for an interview but acknowledged in a statementthat an aide had called the FDIC to ask about Central Pacific's application. Inouye said he was not attempting to influence the outcome. The statement did not address Inouye's personal role in the inquiry, including whether he directed the aide to make the call or knew at the time that it had been made.
Even if Inouye were directly involved, it would not violate the rules the Senate sets for itself, experts said.
Both the FDIC and the Treasury said the decision was not affected by the involvement of Inouye's office.Inouye reported ownership of Central Pacific shares worth $350,000 to $700,000, some held by his wife,at the end of 2007. The shares represented at least two-thirds of Inouye's total reported assets. Inouye has requested a delay in filing his annual financial disclosure for 2008, which was due this spring, and he declined to provide the current value of his investment. Since the end of 2007, the bank's stock has lost 79 percent of its value.
Central Pacific was founded in 1954 by a group of World War II veterans including Inouye who were emerging leaders in Hawaii's Japanese American community.
"The time had come to fund a bank that could provide equitable service not only to the Japanese, but to all communities," Inouye is quoted as saying in an exhibit in the lobby of one of the company's Honolulu branches. Inouye, who became the bank's first secretary, said that he initially invested $3,000, the minimum amount possible.
Central Pacific is Hawaii's fourth-largest bank, holding about 15 percent of the state's deposits. In recent years, it increasingly used the money to make loans in California, funding several large residential developments. By last year, the bank was facing the consequences of California's collapsing housing market. In July, Central Pacific reported a quarterly loss of $146 million, matching its total profit in the previous three years.
In October, shortly after the government announced that it would invest billions of dollars in banks to spur new lending, Central Pacific submitted an application under the initiative, called the Troubled Assets Relief Program, or TARP.
The bank faced long odds. More than 1,600 banks submitted applications to the FDIC in the three months after the program was announced, according to a report by the FDIC's inspector general's office. The agency forwarded 408 applications to Treasury, which approved only 267, or roughly 16 percent of the total.
Central Pacific's situation was even bleaker because it was in trouble with the FDIC. Regulators had raised concerns about the bank earlier in the year. The bank would soon sign an agreement with its state regulator and the FDIC requiring it to raise an additional $40 million in capital and to improve its management practices.
After the bank applied for bailout funds, weeks passed. Andrew Rosen, a spokesman for Central Pacific, said that regulators had told the bank that the process would take "some time" because of the glut of applications.In late November, still waiting for an answer, the bank's government-affairs officer called Inouye's office to ask that it check on the status of the application, according to Rosen. (Rosen said in an initial interview that the bank had not contacted Inouye's office about the application. After Inouye was contacted for this story, Rosen said that he'd been mistaken, that the bank had called Inouye's office.)
One day after the bank's request, an Inouye aide called the FDIC's regional office in San Francisco, which regulates Central Pacific. Inouye said in a statement that the staffer, Van Luong, "simply left a voicemail message seeking to clarify whether Central Pacific Bank's application for TARP funds had actually been received by the FDIC." The statement said that the bank was soon notified that the application had been received, "and that closed the matter."
"This single phone call was the entire extent of my staff's contact with regard to Central Pacific Bank, to any outside agency," Inouye said.
Internal FDIC e-mails obtained through the Freedom of Information Act show that Luong's question was referred from San Francisco to FDIC headquarters in Washington. A few days later, Alice Goodman, who heads the FDIC's office of legislative affairs – and whose office is typically the point of contact for congressional inquiries – called Luong to say that the application "was still under process."
The internal e-mails show that the application had been forwarded to an inter-agency council headed by the Treasury Department that reviews cases in which a bank did not meet the criteria for a federal investment. Those criteria require banks to demonstrate their viability without the benefit of federal funding.
Shortly after the Inouye staffer's phone call, the council approved Central Pacific's application.
So far, more than 600 banks have received federal investments. While some recipients have started to repay aid, the Obama administration announced this spring that it would continue to accept applications from community banks until November. The crush of calls from Capitol Hill on behalf of specific applicants led the Treasury to announce earlier year that it would start releasing a weekly list of congressional inquiries. It has yet to do so.
The question of what role members of Congress have played in influencing the Treasury's decisions is under review by the special inspector general appointed to oversee the financial rescue program. A spokesman for the special inspector general said a report is expected later this summer.
Such contacts by members and their staff do not violate the rules Congress has established to govern itself. "Congress has never been willing to adopt strong conflict-of-interest rules for its members, but for the most part, has left it up to each member to decide for themselves whether they have a potential conflict of interest," said Fred Wertheimer, president of Democracy 21, a watchdog group.
The most similar known case comes from the House. 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.), who did not own shares in the company, subsequently inserted language into the bailout bill that effectively directed the Treasury to give special consideration to that bank.
The report by the FDIC inspector general found that 26 of the 408 companies whose applications were sent to the Treasury faced enforcement actions as severe as those against Central Pacific. Because the FDIC inspector general did not name these 26 banks, it is unclear how many ultimately won the Treasury's approval. Nor is it clear whether any other bank used the Treasury money -- as Central Pacific did -- to address a capital shortfall identified by regulators.
Several financial analysts said they know of no other instances in which Treasury money was used this way. But they said it was impossible to be sure because banks are not required to disclose such regulatory actions, for instance those requiring that firms raise additional capital. Central Pacific had made this disclosure voluntarily.
Andrew Gray, an FDIC spokesman, said the Central Pacific decision was not unique, but he declined to name other banks, citing a policy against commenting on specific institutions.
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To me, the critical parts of this
well-researched story are the
following, which will bear especially
close watching over the next few
months:
"The question of what role members of Congress have played in influencing the Treasury's decisions is under review by the special inspector general appointed to oversee the financial rescue program. A spokesman for the special inspector general said a report is expected later this summer."
and
"Several financial analysts said they know of no other instances in which Treasury money was used this way. But they said it was impossible to be sure because banks are not required to disclose such regulatory actions, for instance those requiring that firms raise additional capital. Central Pacific had made this disclosure voluntarily."
See much more on the very tangled
web that is the world of bank bailouts,
the TARP and the F.D.I.C. with stories
that both confound and irritate at:
http://bailout.propublica.org/
Florida banks that participated in the
federal bailout can be found at:
While I lived in Arlington County, VA
from 1989-2003, I lived at three different
addresses, and based on what I write
about here, you probably won't be too
surprised to discover that each was
near a WMATA Metro station,
Once I was near the Clarendon Metro
station that was the gateway for Little
Saigon and the many great restaurants
in the area my friends and I (and all of
Washington) patronized for their
consistently great food at good prices.
I also lived twice near the Ballston Metro
station, my transit Home Sweet Home,
which was Public Policy Central,
a place where you could not only get
the usual array of Northeast newspapers,
but also the LA Times., which I loved
reading in the morning over coffee at
the place across the street before
getting on the train,
The reason was location, location,
location.
Ballston was located a block from
not only the area's local mall, the
Ballston Mall, but right near the HQ
for the National Science Foundation,
the U.S. Wildlife Service, and The
Nature Conservancy
(Now that you know this, maybe you
all can perhaps better appreciate why
I miss being up there, esp. on those
occasions when I'm confronted with
South Florida's chronic apathy or
nonsensical way of doing things, which,
so often doesn't involve planning and
strategy -or accountability- so much
as trying to re-invent the wheel,
over-and-over with the same motley
cast of clueless cronies.
That's nowehere more true than here
in Hallandale Beach, a city that could
and should be so much better than
it is.)
One constant thru all those years was
the Giant supermarket on Washington
Blvd., near the metro stop just prior to
where I got off at Ballston, which I
often stopped at to pick-up something
on the way home.
As it happens, this particular Giant
was located right next to the huge
F.D.I.C. Training Center, a.k.a. the
L. William Seidman Center,
which was, itself, a neighbor of the
Arlington campus of George Mason
University, housing many of the
graduate school programs, including
their well-known and often in-the-news
And just a few blocks away was the
Navy's Office of Naval Research.
They didn't all look like actress
Catherine Bell in JAG, of course,
but then she was always at the top
of the Bell Curve, mais non?
(FYI: Bell's mom was born in Iran,
so she also speaks Farsi, d'accord.
So why can't someone at the TV
cablenets ask her what she thinks
of Obama's very embarrassing and
underwhelming reaction to what's
brewing in Iran, instead of asking
over-exposed Jon Bon Jovi?
At least she actually understands
what the protestors are saying!!!)
All that proximity meant that among
many other things, at lunchtime and
early evening, that upscale Giant was
often innundated with VERY smart,
cool and good-looking women, a
self-evident fact that didn't go
un-noticed for long in Arlington.
In fact, it was often a source of great
amusement for me and my friends
when someone got bored and talked
about needing to "swing by the Giant."
(While Georgetown may've had their
well-known "Social Safeway," we
had the smart AND good-looking
women over at our Giant.
It's not often that you can actually
run into someone who really has
been to the Arctic Circle, but there,
at that store, it was always possible.)
The store was remodeled as the
F.D.I.C. building was going up to
make it look more sleek, and
modern -but still brick- and become
much more appealing to the eye of
the young and middle-aged upscale
professionals of the area, and they
did a great job,
Having seen the metamorphosis of
that store and the area myself,
I can't help but think of the positive
changes that could take place in
Hollywood when they eventually
get a brand new Publix on the
northeast corner of Young Circle,
Block 55.
To see more on that redevelopment
project, Hollywood Circle, and what
developer Chip Abele hopes to build
there, see my February 19th post
labeled,
In Hollywood, blighted Block 55 gets
a new lease on life as "Hollywood Circle"
