On January 22, 2009, the Wall Street Journal published two stories of importance to community bankers:
- on the front page, the WSJ published an article titled “Political Interference Seen in Bank Bailout Decisions“
- on the front of the Personal Journal section, the WSJ published an article titled “What if Uncle Sam Takes Over Your Bank?“
The “Political Interference” article focuses on the potential role of politics in determining which institutions receive TARP Capital.
Bankers, regulators and politicians complain of a secretive and opaque process for deciding which banks get cash and which don’t. The goal of aiding only banks healthy enough to lend — laid out by the Treasury when the program began — clearly seems to have shifted, but in a way that’s hard to pin down and that the Treasury has declined to explain. Part of the problem is that some powerful politicians have used their leverage to try to direct federal millions toward banks in their home states.
The article focuses on OneUnited Bank in Boston, Massachusetts, which received $12 million in TARP Capital in December. Nominally, OneUnited Bank was certainly a poor candidate for receiving TARP Capital; according to its September 30, 2008 Call Report, One United Bank was critically undercapitalized, with a leverage ratio of 1.7%, a Tier 1 risk-based capital ratio of 2.92%, and total risk-based ratio of 3.67%. In addition, it was subject to a Consent Order to Cease & Desist with the FDIC.