The Washington Post reports:
Sen. Daniel K. Inouye’s [D-HI] staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm’s losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn’t meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye’s office, Central Pacific announced that the Treasury would inject $135 million. . .
Inouye said he was not attempting to influence the outcome. . . Inouye reported ownership of Central Pacific shares worth $350,000 to $700,000, some held by his wife, at the end of 2007. The shares represented at least two-thirds of Inouye’s total reported assets.
(Via Hot Air.)
The FDIC won’t say why they changed their minds, but the timing is striking:
Internal FDIC e-mails obtained through the Freedom of Information Act show that Luong’s question was referred from San Francisco to FDIC headquarters in Washington. . . The internal e-mails show that the application had been forwarded to an inter-agency council headed by the Treasury Department that reviews cases in which a bank did not meet the criteria for a federal investment. . .
Shortly after the Inouye staffer’s phone call, the council approved Central Pacific’s application.
Despite smelling really bad, Inouye’s action does not violate the rules that Congress set for itself:
Such contacts by members and their staff do not violate the rules Congress has established to govern itself. “Congress has never been willing to adopt strong conflict-of-interest rules for its members, but for the most part, has left it up to each member to decide for themselves whether they have a potential conflict of interest,” said Fred Wertheimer, president of Democracy 21, a watchdog group.
The most similar known case comes from the House. Rep. Maxine Waters (D-Calif.) arranged a meeting between regulators and OneUnited of Massachusetts, a bank in which her husband held shares. Rep. Barney Frank (D-Mass.), who did not own shares in the company, subsequently inserted language into the bailout bill that effectively directed the Treasury to give special consideration to that bank.
There’s also this:
The crush of calls from Capitol Hill on behalf of specific applicants led the Treasury to announce earlier [this] year that it would start releasing a weekly list of congressional inquiries. It has yet to do so.
I understand. I’m sure it takes a long time to set that sort of thing up.
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