A community bank at the center of an ethics investigation that has ensnared Rep. Maxine Waters (D-Calif.) received a $12 million bailout even though Treasury Department officials knew it had a record of failing to serve its community’s lending needs.
Boston-based OneUnited Bank had a history of receiving poor performance evaluations, and officials at Treasury and the FDIC were aware of the negative ratings and discussed them before doling out the loan, according to e-mails and other documents Judicial Watch obtained from the Treasury Department through a Freedom of Information Act request.
Waters denied any wrongdoing, mounted an aggressive defense and has opted to make her case in a public trial to take place sometime this fall.
One e-mail produced from the FOIA request sent from former Treasury Senior Adviser Michael Scott to Director of the Office of Financial Institutions Mario Ugoletti is dated Sept. 15, 2008, months before banks were selected to receive bailout funds. The e-mail cites a 2004 evaluation criticizing the bank’s service to the state of Massachusetts. The report noted that in 2002 and 2003, the bank administered just one loan.
“While the institution received a CRA rating of 'Low Satisfactory' on an overall basis, OneUnited Bank’s CRA rating for Massachusetts was 'Needs to Improve' for both the Lending Test and the Investment Test,” evaluators wrote in their report. “Under the Lending Test, the report stated that 'OUB has done a poor job of meeting the credit needs of its [Boston, MA] assessment area. A review of the 2002 and 2003 HMDA
data revealed a total of one loan. There were no reported Community Development Loans (CDL) and any innovative or flexible lending programs were apparently ineffective.”
The report was equally critical of the bank’s failure to invest in any Boston-area entities, calling it a “concern.”
"In Florida, the institution received a CRA rating of ‘Substantial Noncompliance,’ which also represented the subordinate rating for the Lending Test…”
The Community Reinvestment Act (CRA) requires the Federal Financial Institutions Examination Council to assess the institution’s record of meeting the credit needs of its community, including low- and moderate-income neighborhoods. The front page of each of the evaluation notes that it should not “be construed as an assessment of the financial condition of this institution.”
The Treasury documents, which were heavily redacted, also include a memo titled “Regulatory Financial Highlights” that contains detailed financial information related to OneUnited, as well as a summary of information collected by Treasury during its investigation of the bank. The documents show OneUnited was seeking government assistance because the company owned $52 million in Fannie Mae and Freddie Mac stock, which was “irrevocably impaired” when the government seized control of the two GSEs.
On Sept. 11, 2008, Scott e-mailed Ugoletti an e-mail that noted the CRA reports and also appeared to criticize OneUnited Bank for purchasing stock in Fannie Mae and Freddie Mac in the first quarter of 2008, well after the negative CRA reports, when the housing market was already hemorrhaging.
“Also, it appears from her note below that they purchased all of heir [sic] Fannie/Freddie stock in the first quarter of this year. Interesting, huh?” he wrote.
Ugoletti later e-mailed an article to colleagues about an FDIC crackdown on OneUnited for unsound lending and excessive executive perks that included a 2008 Porsche and a housing allowance for a beach-front home in California.
A subsequent e-mail dated Dec. 30 from Ugoletti highlights OneUnited’s inclusion on an announced list of local banks receiving Troubled Asset Relief Program (TARP) funds.
Treasury has produced 639 pages in response to Judicial Watch’s FOIA request, but withheld 203 pages.
“And these documents show that this so-called community bank wasn’t actually lending much to the ‘community’ that Frank and Waters were purporting to help,” he said.
The ethics committee did not criticize Frank in its report.
Waters did not comment for this article. She has admitted that she arranged a meeting between Treasury officials and the National Bankers Association (NBA), a trade association that represents 140 minority-owned banks, including OneUnited. But she said she would “never take extraordinary steps” to protect her husband’s investments.
Waters has claimed her only motivation for setting up the Treasury meeting was helping minority banks, an issue on which she has long been active. In the Wall Street reform bill, for example, Waters added several provisions to protect women and minorities.
"Neither my staff nor I engaged in any improper behavior; we did not influence anyone; and we did not gain any benefit," Waters said. "This case is not just about me. This case is about access, about access to those who are not heard by people in power."
Waters has asserted she had no role in OneUnited’s eventual receipt of more than $12 million in TARP funds and she was unaware of any poor credit and lending ratings it had received. She has also said members of Congress depend on regulatory agencies to investigate and ferret out bad practices in financial institutions.
Mikael Moore, Waters’s chief of staff and grandson, said e-mails he exchanged with OneUnited officials in late September cited in the ethics committee’s report do not indicate he was trying to help them secure TARP funds. He said an e-mail he sent to OneUnited contained a publicly available draft of the TARP legislation, not language drafted specifically to help the bank.
Moore pointed to an e-mail he received from Neel Kashkari, who at the time in question was the assistant Treasury secretary in charge of the Office of Financial Stability, which was established to buy troubled financial assets under TARP.
In the e-mail, Kashkari said the Sept. 9, 2008, meeting between OneUnited executives and Treasury officials did not in any way influence his decision to award the bank $12 million in federal funds.