FDIC Denies Maintaining List of Banks with ‘Prominent Connections’ (PJM Exclusive)
On September 17, the Washington Post released a story accusing the Federal Deposit Insurance Company of maintaining a list of banks with connections to prominent people.
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.
If true, dangerous times are ahead
maybe it would have been better said,”if true, the current financial crisis is about to become more tumultuous.”
The trouble is that this organization (FDIC) like the equal opportunity section of the Justice Department, will never voluntarily confess to its own behavior once it realizes it is felonious. The only way tbat the truth will come out is if congress defunds the entire organization, and replaces it with a new one whose staff are chosen to be responsible.
The threat of this may well bring forward whistle blowers who will obviate the need for this draconian step, but the threat must stay on the table until the behavior is made transparent to the American people.
So can we can start calling them fascists now?
Transparency? Sheesh. You got big dreams in this world. Every organization salutes the politicians because with a phone call they can have an FDIC investigator crawling through your books for weeks. Try a Medicare audit, not that they aren’t needed, but when a group comes into your shop and requires you to rent a dozen copy machines for them you get a feel for what dissing the politicians can bring you. Campaign contributions is the leading cause of cranking the wheel in their favor. We must be able to band together as small donors to get politicians that work for the majority and not the big donors.
Issa ought start with the GM and Chrysler sweetheart deals with the unions and the connected friends who were allowed to keep dealerships while stealing millions if not billions from the dealers that were not connected. I know a guy who was forced to give up his Cadillac dealership that was profitable and had an exclusive 35 mile radius from GM. Forced to give up for a fraction of it’s worth. If and when the FDIC friends and family investigation starts with the FDIC, inevitably it will tie into the office of Comptroller Of the Currency and the other federal banking regulators and from there the sweetheart loans given to the friends and families (that they would on their own never qualify for) which will tie in the unions, the crony auto dealers, crony real estate developers,the large wall street brokerage houses and the banks that made the garbage loans with the blessings of the regulators and their political masters and all of the other politically favored connections. Crony capitalism isn’t capitalism. It’s fascism.
Mark twain was right. Congress is the only native American criminal class.
Looks like another episode in bank profiling to me, or do I have that confused with red lining? Black mail? We’ve come a long ways, finally color blind crony state capitalism.
Mr. Issa, come January 2011, use your subpoena power wisely. There is much to do.
It’s about time somebody started looking into this.
NO bank, NO auto company, and NO financial institution should have been “bailed out.” Were it not for Obozocare, the Porkulus bill, and TARP, we would actually be out of the Great Recession by now.