New Waters/Frank Scandal Documents Uncovered by JW: OneUnited Bank Received “Less than Satisfactory” Assessment Prior to Bailout
Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it has received new documents from the U.S. Department of Treasury related to the controversial $12 million bailout grant provided to the Boston-based OneUnited Bank. The documents, obtained in response to a Freedom of Information Act (FOIA) lawsuit filed against Treasury, include internal Treasury Department emails describing the substandard condition of OneUnited prior to the taxpayer-funded bailout, which allegedly occurred at the behest of Reps. Maxine Waters and Barney Frank.
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.”
In Florida, the institution received a CRA rating of “Substantial Noncompliance” which also represented the subordinate rating for the Lending Test…
A subsequent 2007 CRA evaluation noted continued problems with OneUnited’s lending program, particularly in Florida.
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:
According to the WSJ [Wall Street Journal] Barney Frank told them that he specifically put section 103-6 in the bill in order to help this particular bank. Apparently this bank also had an issue with a Porsche that the regulators had made them get rid of. The story will run later this week and will highlight three banks that they think raise questions and are not “healthy” banks…
As reported in the January 22, 2009, edition of the Wall Street Journal, the Treasury Department indicated it would only provide bailout funds to healthy banks to jump-start lending.
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.”
The Obama administration has thus far produced 639 pages in response to Judicial Watch’s FOIA investigation of the Waters/Frank bailout scandal, but is withholding in full 203 pages.