WSJ Peeks Under the TARP

The Journal has some excellent reporting today on TARP and how political influence is playing out in who gets money.

It focuses on the powerful Democrat Barney Frank, the Massachusetts congressman and chairman of the House Financial Services Committee, who intervened to get a home-state bank called OneUnited $12 million in TARP funds despite the fact that it didn’t fit the requirements for that money.

Longtime Democratic congresswoman Maxine Waters also comes in for scrutiny:

A OneUnited lawyer, Robert Cooper, says he called Rep. Frank and Rep. Maxine Waters of California, both Democrats, to complain that the Treasury’s move had hurt the bank.

Rep. Waters heads the House Financial Services subcommittee on housing, and until last spring her husband, Sidney Williams, was a OneUnited director.

And the bank had been in trouble recently:

On Oct. 27, the FDIC and Massachusetts bank regulatory officials, alleging poor lending practices and executive-compensation abuses by OneUnited, slapped it with a strong enforcement action, a cease-and-desist order. Among other things, the officials told the bank to get rid of a 2008 Porsche for executives.

The WSJ shows how arbitrary the allocation of bailout funds has been. Take Ohio, for example:

A political firestorm erupted in Ohio when it became clear the government had turned down National City, a 163-year-old bank with deep roots in Cleveland. Ohio’s congressional delegation sent dozens of letters to Messrs. Dugan and Paulson and threatened to hold hearings on how the Treasury had supposedly wrecked a bank they said wasn’t in immediate danger of collapsing…

In addition, Ohio banks are now faring better. Twelve Ohio banks have subsequently received a total of $7.7 billion in taxpayer funds. In neighboring Michigan — like Ohio, hurt by the auto-industry slump — only two banks have had federal infusions and a third has preliminary approval, for infusions totaling $638 million.

The press needs to be lifting up the TARP where it can to see what the government’s got going on under there. The secrecy is impossible to defend, especially when hundreds of billions of our dollars are going to bail out the bankers who created this crisis—and who are still paying themselves richly. Hell, it’s so bad that even the bankers are complaining:

Bankers, regulators and politicians complain of a secretive and opaque process for deciding which banks get cash and which don’t. The goal of aiding only banks healthy enough to lend — laid out by the Treasury when the program began — clearly seems to have shifted, but in a way that’s hard to pin down and that the Treasury has declined to explain. Part of the problem is that some powerful politicians have used their leverage to try to direct federal millions toward banks in their home states.

More like this, please.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.