ProPublica and the Washington Post are making a nice little team this week.
On Monday they wrote about how General Electric lobbied its way into billions of dollars in bailout money—without suffering the regulatory consequences.
Today they report that Hawaii’s Democratic Senator Daniel Inouye intervened in the fall on behalf of a bank he founded and in which two-thirds of his personal wealth is invested. The bank was an “unlikely candidate” to get TARP funds, ProPublica and the Post say, but it got $135 million of them —two weeks after the senator’s office called the FDIC.
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.
Reporters Paul Kiel and Binyamin Appelbaum report that the bank was an unlikely candidate for the bailout because it had been tagged by regulators, but the story isn’t clear on why the bank got in trouble:
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.
The piece seems to imply that the regulatory action was because of a capital shortfall, but it’s unclear:
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.
The piece adds some helpful context about why this action isn’t a violation of Senate conflict-of-interest rules, and points out that another controversial instance of politicians—Maxine Waters and Barney Frank—stepping in to help a bank they have ties to.