Why Politicians Are Scum
Troubled OneUnited Bank in Boston didn’t look much like a candidate for aid from the Treasury Department’s bank bailout fund last fall.
The Treasury had said it would give money only to healthy banks, to jump-start lending. But OneUnited had seen most of its capital evaporate. Moreover, it was under attack from its regulators for allegations of poor lending practices and executive-pay abuses, including owning a Porsche for its executives’ use.
Nonetheless, in December OneUnited got a $12 million injection from the Treasury’s Troubled Asset Relief Program, or TARP. One apparent factor: the intercession of Rep. Barney Frank, the powerful head of the House Financial Services Committee.
Mr. Frank, by his own account, wrote into the TARP bill a provision specifically aimed at helping this particular home-state bank. And later, he acknowledges, he spoke to regulators urging that OneUnited be considered for a cash injection.
Please take note of the bolded statement…
A link between such lobbying and the release of TARP cash can’t be proved. Treasury officials have said that political influence plays no role in the selection process. "The decisions are made by a committee of officials at Treasury based on recommendations and data provided by the regulators through the applications process," said Brookly McLaughlin, who was a spokeswoman for the Treasury until the Bush administration ended on Tuesday.
It can’t be proved!!!??? Didn’t Mr. Frank admit it!? The political landscape in our country just pisses me off!
The procedure for getting a capital injection is complex. State and federal regulators sometimes complain that even they don’t understand how it works.
A bank applies through its federal regulator, which either recommends to the Treasury that the bank receive money or quietly tells the bank to pull its application. A public turndown could be a death sentence because it would tell investors and consumers the government thinks the bank isn’t viable.
If the regulator forwards the application, the Treasury decides whether to approve it. If the Treasury’s reviewing team is uncertain, it sends the request to a panel of federal regulators to debate the matter.
This entire thing was flawed from the get go. It also ties in with my previous blog post. Remember, the point of this bailout was to give banks money to cover debt so that they, in turn, would lend money to consumers again. Ask yourself if this has happened?