WaPo Editorializes: Banking on Barney

If Americans are angry at Washington, it may be because of episodes like the federal coddling of OneUnited Bank. A minority-owned institution with close ties to Rep. Maxine Waters (D-Calif.) of the House Financial Services Committee, OneUnited got $12 million from the Troubled Assets Relief Program in December 2008, thanks in part to a provision inserted in the TARP bill by the committee’s chairman, Rep. Barney Frank (D-Mass.). OneUnited has since failed to pay the government the $900,000 it owes — not surprising, given its history of mismanagement, which TARP officials elided to approve the money in the first place.

Ms. Waters now faces a House investigation on charges she improperly aided OneUnited, whose past directors include her husband; she denies it. Mr. Frank faces no such proceeding, but this is not his finest hour, either.

…

Federal support of minority-owned banks can help financial services reach underserved communities. But OneUnited specialized in serving itself. Indeed, the Federal Deposit Insurance Corp. cracked down on a top officer’s use of bank funds for a Porsche and a couple of mansions. Other regulators had consistently noted OneUnited’s failure to meet community credit needs. Mr. Frank says he knew none of this — but he also made no effort to check OneUnited out beyond what he learned from Ms. Waters and others lobbying on its behalf.

…

So a dodgy bank with little going for it except access to powerful members of Congress gets $12 million for no evident public purpose and with little chance taxpayers will ever see that money again. Those responsible insist that, according to prevailing norms in the nation’s capital, they did nothing wrong. Worst of all, they might be telling the truth.

Read more: (Editorial, “The Troubling Bailout of OneUnited Bank,” The Washington Post, 10/05/2010)