Friday, July 12, 2024
Hawai'i Free Press

Current Articles | Archives

Tuesday, August 3, 2010
Bank bailouts: Maxine Waters faces ethics charges—Inouye next?
By Andrew Walden @ 3:44 PM :: 11670 Views :: Energy, Environment, National News, Ethics

by Andrew Walden

House ethics charges are being filed against Rep Maxine Waters (D-CA) over her role in securing a TARP bailout for her husband’s bank.  AP reports:

The charges focus on whether Waters broke the rules in requesting federal help for a bank where her husband owned stock and had served on the board of directors. She denied the charges Monday.  Persons familiar with the case said Waters is accused of violating:

  • A rule that House members may not exert improper influence that results in a personal benefit.
  • The government employees' ethics code, which prohibits granting or accepting special favors, for the employee or family members, that could be viewed as influencing official actions.
  • A rule that members' conduct must reflect creditably on the House.

Could Sen. Dan Inouye be next?  The US Senate equivalents of these three charges could easly be brought to bear against him if the political will exists.  While Waters was allegedly seeking help for her husband’s bank, Inouye allegedly sought help for Central Pacific Bank.  At the time, CPB stock made up an estimated 66% of Inouye’s personal net worth.

Waters claims the House ethics charges—put forward by Nancy Pelosi’s Obama Democrats--are racially motivated.  But politics is more likely the cause.  Waters backed Hillary Clinton in the 2008 Primaries.   Rep Charles Rangel (D-NY)—also being hammered over corruption issues—likewise supported Hillary Clinton against Obama in the Primaries. 

Sen. Inouye not only supported Clinton, but stymied Ed Case, the National Obama Democrats’ pick for US House in the recent Special Election won by Charles Djou.  Inouye, while feigning neutrality, is currently backing Mufi Hannemann for Governor against lifelong Obama associate Neil Abercrombie.  Could Inouye fall victim to the same kind of political retaliation upon which he bases his political career?

This article from Pro-Publica, cross-posted on Hawai`i Free Press June 30, 2009, examines the Waters case and the Inouye case together.  There aren’t many differences.

  *   *   *   *   *

After Call From Senator Inouye’s Office, Small Hawaii Bank Got U.S. Aid

by Paul Kiel, ProPublica, and Binyamin Appelbaum, Washington Post

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 [2], 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 [3] 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 statement [4] that 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 [5]. 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 [6], 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 [7] 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 [8] (D-Calif.) arranged a meeting between regulators and OneUnited of Massachusetts, a bank in which her husband held shares. Rep. Barney Frank [9] (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.


Reprinted with permission from Pro Publica Inc. © Copyright 2009 Pro Publica Inc.

Original posting:

WaPo 7-1-09:


TEXT "follow HawaiiFreePress" to 40404

Register to Vote


Aloha Pregnancy Care Center


Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii


Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii Military History

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Together


Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

July 4 in Hawaii

Land and Power in Hawaii

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

National Parents Org Hawaii

NFIB Hawaii News

NRA-ILA Hawaii


OHA Lies

Opt Out Today

Patients Rights Council Hawaii

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

Rental by Owner Awareness Assn

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

School Choice in Hawaii

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii