Friday, October 31, 2014   Search

Current Articles | Archives | Search

Tuesday, June 30, 2009
After Call From Senator Inouye’s Office, Small Hawaii Bank Got U.S. Aid
By Selected News Articles @ 9:49 PM :: 5400 Views :: Energy, Environment, National News, Ethics
 

by Paul Kiel, ProPublica, and Binyamin Appelbaum, Washington Post

Sen. Daniel K. Inouye's 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 [2], 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.

Many lawmakers have worked to help home-state banks get federal money since the Treasury announced in October that it would invest up to $250 billion [3] in healthy financial firms. But the Inouye inquiry stands apart because of the senator's ties to Central Pacific. While at least 33 senators own shares in banks that got federal aid, a review of financial disclosures and records obtained from regulatory agencies shows no other instance of the office of a senator intervening on behalf of a bank in which he owned shares.

Inouye (D-Hawaii) declined a request for an interview but acknowledged in a statement [4] that an aide had called the FDIC to ask about Central Pacific's application. Inouye said he was not attempting to influence the outcome. The statement did not address Inouye's personal role in the inquiry, including whether he directed the aide to make the call or knew at the time that it had been made.

Even if Inouye were directly involved, it would not violate the rules the Senate sets for itself, experts said.

Both the FDIC and the Treasury said the decision was not affected by the involvement of Inouye's office.

Inouye reported ownership of Central Pacific shares worth $350,000 to $700,000, some held by his wife, at the end of 2007 [5]. The shares represented at least two-thirds of Inouye's total reported assets. Inouye has requested a delay in filing his annual financial disclosure for 2008, which was due this spring, and he declined to provide the current value of his investment. Since the end of 2007, the bank's stock has lost 79 percent of its value.

Central Pacific was founded in 1954 by a group of World War II veterans including Inouye who were emerging leaders in Hawaii's Japanese American community.

"The time had come to fund a bank that could provide equitable service not only to the Japanese, but to all communities," Inouye is quoted as saying in an exhibit in the lobby of one of the company's Honolulu branches. Inouye, who became the bank's first secretary, said that he initially invested $3,000, the minimum amount possible.

Central Pacific is Hawaii's fourth-largest bank, holding about 15 percent of the state's deposits. In recent years, it increasingly used the money to make loans in California, funding several large residential developments. By last year, the bank was facing the consequences of California's collapsing housing market. In July, Central Pacific reported a quarterly loss of $146 million [6], matching its total profit in the previous three years.

In October, shortly after the government announced that it would invest billions of dollars in banks to spur new lending, Central Pacific submitted an application under the initiative, called the Troubled Assets Relief Program, or TARP.

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.

After the bank applied for bailout funds, weeks passed. Andrew Rosen, a spokesman for Central Pacific, said that regulators had told the bank that the process would take "some time" because of the glut of applications.

In late November, still waiting for an answer, the bank's government-affairs officer called Inouye's office to ask that it check on the status of the application, according to Rosen. (Rosen said in an initial interview that the bank had not contacted Inouye's office about the application. After Inouye was contacted for this story, Rosen said that he'd been mistaken, that the bank had called Inouye's office.)

One day after the bank's request, an Inouye aide called the FDIC's regional office in San Francisco, which regulates Central Pacific. Inouye said in a statement that the staffer, Van Luong, "simply left a voicemail message seeking to clarify whether Central Pacific Bank's application for TARP funds had actually been received by the FDIC." The statement said that the bank was soon notified that the application had been received, "and that closed the matter."

"This single phone call was the entire extent of my staff's contact with regard to Central Pacific Bank, to any outside agency," Inouye said.

Internal FDIC e-mails [7] obtained through the Freedom of Information Act show that Luong's question was referred from San Francisco to FDIC headquarters in Washington. A few days later, Alice Goodman, who heads the FDIC's office of legislative affairs – and whose office is typically the point of contact for congressional inquiries – called Luong to say that the application "was still under process."

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. Those criteria require banks to demonstrate their viability without the benefit of federal funding.

Shortly after the Inouye staffer's phone call, the council approved Central Pacific's application.

So far, more than 600 banks have received federal investments. While some recipients have started to repay aid, the Obama administration announced this spring that it would continue to accept applications from community banks until November. The crush of calls from Capitol Hill on behalf of specific applicants led the Treasury to announce earlier year that it would start releasing a weekly list of congressional inquiries. It has yet to do so.

The question of what role members of Congress have played in influencing the Treasury's decisions is under review by the special inspector general appointed to oversee the financial rescue program. A spokesman for the special inspector general said a report is expected later this summer.

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 [8] (D-Calif.) arranged a meeting between regulators and OneUnited of Massachusetts, a bank in which her husband held shares. Rep. Barney Frank [9] (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.

The report by the FDIC inspector general found that 26 of the 408 companies whose applications were sent to the Treasury faced enforcement actions as severe as those against Central Pacific. Because the FDIC inspector general did not name these 26 banks, it is unclear how many ultimately won the Treasury's approval. Nor is it clear whether any other bank used the Treasury money -- as Central Pacific did -- to address a capital shortfall identified by regulators.

Several financial analysts said they know of no other instances in which Treasury money was used this way. But they said it was impossible to be sure because banks are not required to disclose such regulatory actions, for instance those requiring that firms raise additional capital. Central Pacific had made this disclosure voluntarily.

Andrew Gray, an FDIC spokesman, said the Central Pacific decision was not unique, but he declined to name other banks, citing a policy against commenting on specific institutions.

---30---

Reprinted with permission from Pro Publica Inc. © Copyright 2009 Pro Publica Inc.

Original posting: http://www.propublica.org/ion/bailout/item/senator-inouye-small-hawaii-bank-aid-630

WaPo 7-1-09: http://www.washingtonpost.com/wp-dyn/content/article/2009/06/30/AR2009063004229.html?hpid=topnews

Comments
comment By Point of Order @ Friday, September 18, 2009 2:07 PM
Comments from the following blog entry: New Treasury Guidelines Prohibit Congressional Lobbying on TARP, located at: http://www.d1040331.dotsterhost.com/applications/serendipity/index.php?/archives/173-New-Treasury-Guidelines-Prohibit-Congressional-Lobbying-on-TARP.html

comment @ Monday, May 09, 2011 8:30 AM
Comments from the following blog entry: http://temp.pointoforder.com/2009/09/18/new-treasury-guidelines-prohibit-congressional-lobbying-on-tarp/

comment @ Monday, May 09, 2011 10:46 AM
Comments from the following blog entry: http://temp.pointoforder.com/2009/09/18/new-treasury-guidelines-prohibit-congressional-lobbying-on-tarp/

comment By Hawaii Free Press @ Monday, November 28, 2011 12:17 PM
Comments from the following blog entry: Failing, Central Pacific Got $337M in Secret Federal Reserve Loans, located at: http://www.hawaiifreepress.com/ArticlesMain/tabid/56/articleType/ArticleView/articleId/5541/Failing-Central-Pacific-Got-337M-in-Secret-Federal-Reserve-Loans.aspx

comment By Hawaii Free Press @ Saturday, December 24, 2011 11:57 AM
Comments from the following blog entry: Fed Once-Secret Central Pacific Bank Loan Data Released to Public, located at: http://www.hawaiifreepress.com/ArticlesMain/tabid/56/articleType/ArticleView/articleId/5724/Fed-OnceSecret-Central-Pacific-Bank-Loan-Data-Released-to-Public.aspx

comment By Hawaii Free Press @ Sunday, January 29, 2012 1:07 PM
Comments from the following blog entry: FHA Bringing Subprime Jumbo Mortgages to Hawaii, located at: http://www.hawaiifreepress.com/ArticlesMain/tabid/56/articleType/ArticleView/articleId/5991/FHA-Bringing-Subprime-Jumbo-Mortgages-to-Hawaii.aspx

LINKS:

TEXT "follow HawaiiFreePress" to 40404

ARCHIVES: Daily News Read

ARCHIVES: HawaiiFreePress

JOIN OUR EMAIL LIST

RSS FEED Latest 25 articles

TWITTER HawaiiFreePress

SoundCloud HawaiiFreePress

Register to Vote

2aHawaii

ABCDEF Group Samoa

ALEC

Alliance Defending Freedom

Aloha Conservative Alliance

Aloha Life Advocates

Aloha Chapter MOAA

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

Angelaisms

AntiPlanner

Antonio Gramsci Reading List

A'ole Eradication

A Place for Women in Waipio

Atomic Monkey

Ballotpedia Hawaii

Better Hawaii

Broken Trust

CAFR Hawaii

Castaway Conservative

Catholic Homeschoolers of Hawaii

Children's Rights Institute

Choice is an Illusion

Christian Home Educators of Maui

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

Concerned Women For America Hawaii

Conservative Forum for Hawaii

CSIS Pacific Forum

Danny DeGracia Blog

December 7 Battlefields at risk

DefendOurKeiki.com

DVids Hawaii

Education Institute of Hawaii

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Friends of Lanai

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

Global Warming "Scientists" Email Files #1

Global Warming "Scientists" Email Files #2

God, Freedom, America

GoGoGMO!

Grassroot Blog

Grassroot Institute

Habele.org

Hadassah Hawaii

Hawaii Aganst Assisted Suicide

Hawaii Alliance of Student Veterans

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Concealed Carry

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federated Republican Women's Association

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Knights of Columbus

Hawaii March for Life

Hawaii Meth Project

Hawaii Public Charter School Network

HawaiiReporter.com

Hawaii Republicans for Life

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Senate Informer

Hawaii Shield Law Coalition

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Tropical Fish Association

Hawaii Votes

Hepsy's Kuleana

Heritage Foundation

HI Coalition Against Legalized Gambling

HIRA

Hiram Fong Papers

History Education Hawaii

Homeschool Legal Defense Hawaii

Honolulu Alliance

Honolulu College Republicans

Honolulu Navy League

Honolulu TEA Party

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus

House Republican Caucus YouTube

HPACC

Hump Day Report

I Aloha Molokai

I Vote Hawaii

If Hawaii News

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Israel Day Hawaii

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kahua Group

Kakaako Cares

Kau TEA Party

Kauai Co GOP

KeyWiki

Kona TEA Party

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Let's Lose LOST

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Minority Caucus YouTube

Missile Defense Advocacy

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

Native Hawaiian Grants Project

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

No Hawaii Beverage Tax

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

OHA Lies

Ohana Policy Group

Pacific Aviation Museum

Patriot Voices Hawaii

PEACE Hawaii

Perry and Price Show

Pritchett Cartoons

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

Rightly POV

RJ Rummel

Robotics Organizing Committee

Saipan Unheard No More

Save Hanalei Ridge

Save Our Doctors Hawaii

Save the Plastic Bag

School Choice in Hawaii

Senate Minority Blog

SenatorFong.com

SGLF

SIFE BYUH

SIFE HPU

SIFE Remington

SIFE W. Oahu

Smart About Marijuana--Hawaii

Smart Business Hawaii

St Damien

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Stop SB2424

Stop the Maui Farming Ban

Student Veterans Oahu and Kauai

Tax Foundation of Hawaii

TEA Party Maui

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

The Verifiable Truth

The Voice of Kapolei

Tim Lussier HuffPo Hawaii

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

United Veterans Hawaii

US Tax Foundation Hawaii Info

USO Hawaii

Valor in the Pacific

VAREP Honolulu

Vote No 113

Waagey.org

WAPNFFS

Watchdog Hawaii

Watchdog Wire

West Maui Taxpayers Association

YAL UH Hilo


Maui TEA Party
Maui TEA Party