FDIC Denies Maintaining List of Banks with ‘Prominent Connections’ (PJM Exclusive)
Responding to PJM, the Federal Deposit Insurance Company denies the allegations raised in a recent Washington Post story. But they have not yet responded to the Post directly.
September 27, 2010 - 8:46 am
The story was related to the ethics investigation involving Rep. Maxine Waters, (D-CA) and the Massachusetts bank OneUnited, which received $12 million in bailout money from the Troubled Assets Relief Program. A bailout which — according to both an inspector general tasked with investigating the FDIC, and the Washington Post — was unprecedented in the level of consideration the bank was given.
According to the Washington Post story:
Congress adjusted the law and regulators broke with customary practices, despite an explicit internal warning that the bank was in financial trouble. Among other exceptions, the bank was allowed to count as part of its capital $12 million in federal bailout money — before the aid arrived.
OneUnited was the only bank to receive all of these considerations among the 707 recipients of money from the Troubled Assets Relief Program, according to documents and interviews.
Waters’ husband, Sidney Williams, was a former member of OneUnited’s board of directors, and still had approximately $350,000 in stock in the bank at the time of the bailout.
As troubling as the bailout is, the FDIC’s alleged “list of banks with prominent connections” is more troubling still. Says the Post:
A Washington Post review of documents and interviews with many involved in the decisions show that regulators flagged the bank early on for its “highly visible” connection — in OneUnited’s case, a former board member who is married to Waters, the chairman of an important banking subcommittee. The alert was part of a previously undisclosed practice at the Federal Deposit Insurance Corp. of trying to identify banks that might cause “unnecessary press or public relations” problems, according to testimony a top FDIC official gave to House ethics investigators.
All of this on Thursday prompted Rep. Darryl Issa (R-CA) of the House Committee on Oversight and Government Reform to send a letter to FDIC Chairwoman Sheila Bair demanding answers:
I was troubled to learn that, according to a senior official at the Federal Deposit Insurance Corporation (FDIC), the FDIC has “routinely flagged any bank” that had “connections to prominent people” or might otherwise cause “unnecessary press or public relations” problems. This previously undisclosed practice, revealed last week in the Washington Post, raises concerns that the FDIC may be making decisions based on factors other than protecting the best interests of taxpayers and depositors. I am writing to request more information about this FDIC practice.
Issa is demanding answers to four questions from the FDIC no later than Oct. 4:
1. A full and complete explanation of any FDIC practice or effort to identify banks that have connections to prominent people or might cause press or public relations problems;
2. A full and complete explanation of the criteria or metrics the FDIC uses to determine if a bank has connections to prominent people or might cause press or public relations problems;
3. A full and complete explanation of how the FDIC treats a bank which has been identified as having connections to prominent people or potentially causing press or public relations problems differently from a bank not so designated;
4. A list of all institutions regulated by the FDIC which have been identified by the FDIC, between January 1, 2007, and September 20, 2010, as having connections to prominent people or potentially causing press or public relations problems. The list should include, but not be limited to, the following information for each institution:
a. The name of the institution;
b. The date at which it was identified by the FDIC as having connections to prominent people or potentially causing press or public relations problems;
c. A full and complete explanation of all reasons it was identified by the FDIC as having connections to prominent people or potentially causing press or public relations problems; and
d. If the institution was later removed from any list of institutions identified as having connections to prominent people or potentially causing press or public relations problems, a full and complete explanation of all reasons why the institution was removed.