Treasury Department officials sent bailout money to dozens of banks with known financial problems, and a growing number of bailed-out banks are struggling to stay afloat, a new government audit says.
Banks seeking money from the $700 billion financial bailout faced different standards depending on which agency regulated them, according to a report Monday from the Government Accountability Office. Some questionable banks got bailouts by persuading Treasury officials to overlook their problems. Others were blocked by regulators from making a case to Treasury.
Officials approved bailouts for 66 banks with known problems, the GAO found. Those banks have fared worse than the others in the program. They were twice as likely to miss dividend payments they owed to Treasury, the report says.
The report blasts Treasury for failing to track decisions by regulators about which banks could apply for money and which are strong enough to repay. It says the same problems could plague a new program that will send $30 billion to small banks. The new program aims to boost lending by offering banks government money at very low rates.
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Related:
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Now let's examine the case of Rep. Maxine Waters and OneUnited Bank, in which Waters husband was a large investor and board member.
Here's the rub -- while you will read below that Waters set up (demanded) the special meeting with Treasury officials on behalf of the entire association of minority owned banks, OneUnited was the only bank at the meeting, essentially destroying her argument that her intervention was not specifically aimed at helping her husband's dying investment.
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Judicial Watch President Tom Fitton said the documents suggest that without the powerful intervention of Frank and Waters, OneUnited would not have received the $12 million bailout.
“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.
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Lastly, have you seen this clip: