New Questions About Barney Frank and the OneUnited Scandal

In January 2009 we reported that as part of the release of TARP dollars, Congressman Barney Frank directed funds to a local Massachusetts bank Cited by regulators for excesses (they bought the CEO a Porsche). Even worse the Bank has been cited for unsound Business Practices. This is the same TARP allocation that got Maxine Waters in trouble with the Ethics committee. New documents obtained by Judicial Watch go even further to prove that without the intervention of Frank and Waters, there is no way that OneUnited would have gotten a penny of TARP Dollars.

Frank, head of the powerful House Financial Services Committee, acknowledged that last fall he inserted into the government’s $700 billion Troubled Assets Relief Program bill specific language to help OneUnited, New England’s only black-owned bank. He also said he contacted someone at the Treasury Department about OneUnited’s application for emergency TARP funds, though he insisted he never asked Treasury to bend any rules on behalf of OneUnited.  At the same time But OneUnited was facing regulatory scrutiny last fall from other government agencies, which later slapped a cease-and-desist order on OneUnited due to “unsafe and unsound banking practices.”

Five months ago we learned that maybe Mr. Frank was not telling the whole truth, and nothing but the truth.

When Barney Frank was asked about intervening on behalf of a home state bank for Troubled Assets Relief Program (TARP) funds, the Massachusetts Democrat admitted he spoke to a “federal regulator” but according to the Wall Street Journal, “he didn’t remember which federal regulator he spoke with.”

According to explosive new Treasury Department emails uncovered by Judicial Watch, it appears this nameless bureaucrat is nne other than then-Treasury Secretary Henry “Hank” Paulson!

The documents indicate that Frank personally called former Secretary Paulson regarding a TARP cash infusion for OneUnited Bank. Among the key documents is an October 17, 2008, email from former Deputy Assistant Secretary for Banking and Finance King Mueller to former Assistant Treasury Secretary Neel Kashkari and other Treasury officials referencing the contact between Frank and Paulson:

Just spoke w/ Jim [Segel] in BF's [Barney Frank’s] office. This is about One United Bank (a minority owned bank in BF's district). Maxine Waters is interested in the bank as well, Treas[ury] and others met w/ them (minority bankers assoc) last month per the Water's request. They were a big holder in f/f preferred. BF is interested and may call HMP [Henry Paulson] again about this. FDIC is their primary federal regulator. [Emphasis added.]And there is also this October 16, 2008, email from Kashkari to former Deputy Assistant Secretary for Appropriations and Management Peter Dugas:

“Peter, Jim Siegel [sic] from Frank’s office called a few times-can one of you follow-up with him?” (Segel serves as Frank’s Chief Counsel.) Paulson’s October 2008 calendar, which has been released separately, details calls from Frank on October 2, 3, 7, 9, 13, and 17

Today Judicial Watch released another load of documents from the U.S. Department of Treasury, obtained via a FOIA lawsuit. These document's include internal Treasury Department emails talking about OneUnited's poor performance and substandard operation and controls.

For example, a September 15, 2008, email from former Treasury Senior Advisor Michael Scott to Director of the Office of Financial Institutions Mario Ugoletti, includes a Community Reinvestment Act (CRA) evaluation administered by the Federal Financial Institutions Examination Council (FFIEC) noting serious issues with OneUnited’s lending practices:

2004 CRA Public Evaluation: 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. 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.” For the Massachusetts Investment Test, the report stated that “the level and complexity of investments within the Boston assessment area is less than satisfactory there were no equity investments or qualified deposits within the assessment area. The low volume of qualified investments within the assessment area is a concern.”

It gets worse, when Frank made his initial comments that the OneUnited Bank met all of the requirements to receive TARP help, treasury employees were concerned that Frank wasn't being totally honest.

The documents also include a January 3, 2009, email from Brookly McLaughlin, Treasury’s Deputy Assistant Secretary for Public Affairs, to former Assistant Treasury Secretary Neel Kashkari highlighting Barney Frank’s intervention in the OneUnited Bank bailout and calling attention to significant concerns about the OneUnited transaction:

....The Treasury documents also include a memorandum entitled “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. According to these documents OneUnited sought government assistance in part 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. However, as noted by one Treasury email from Michael Scott, OneUnited “purchased their Fannie/Freddie stock in the first quarter of 2008,” long after the problems cited in the government’s two CRA assessments. The official commented, “Interesting, huh?”

“These emails suggest that without the corrupt intervention of Barney Frank and Maxine Waters OneUnited would not have gotten a $12 million taxpayer bailout,” stated Judicial Watch President Tom Fitton. “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.”

When the ethics committee released their report about Maxine Waters, it seemed that Barney Frank helped to push Ms Waters under the bus. Frank told the committee he helped his Congressional colleague out and directed his staff to make OneUnited eligible for TARP funds, behavior that while sleazy because the bank was in trouble because of other violations and probably should not have received tarp funds, apparently it was not unethical.

"I was never a subject of the investigation,'' Frank said, adding that he turned over many documents and e-mails to assist the panel in its inquiry.

But now we know more, that it wasn't Frank's staff it was Frank himself that helped OneUnited to get its TARP money.  And we also know that Frank knew the bank was in trouble. Perhaps its time for the Ethics Committee to take another look at Barney Frank's involvement in this scandal.