Politics

Not my bank, not my problem

By Paul Blumenthal

But this is his bank, so it is his problem.

Sen. Daniel Inouye pressured the Treasury Department and the FDIC to approve a bailout contract with Central Pacific Financial, a bank Inouye founded and where he held most of his wealth. The bank was also in trouble with the FDIC and did not appear to meet criteria for bailout funds:

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.

…

The bank faced long odds. More than 1,600 banks submitted applications to the FDIC in the three months after the program was announced, according to a report by the FDIC’s inspector general’s office. The agency forwarded 408 applications to Treasury, which approved only 267, or roughly 16 percent of the total.

Central Pacific’s situation was even bleaker because it was in trouble with the FDIC. Regulators had raised concerns about the bank earlier in the year. The bank would soon sign an agreement with its state regulator and the FDIC requiring it to raise an additional $40 million in capital and to improve its management practices.

Not the greatest endorsement of the bailout process. Of course, they aren’t going to tell you how this contract was approved on FinancialStability.gov.

Also, why does it seem that all senators who’ve been in office for 30 or 40 years act like they can do whatever they want.

Full post as published by Sunlight Foundation on July 01, 2009 (boomark / email).