The upshot of the story indicates Inouye and his staff did nothing illegal but certainly pushed the envelop of favoritism on behalf of the senator's vested interest. Inouye reported he owned shares valued between $350,000 to $700,000 in 2007 in Central Pacific Financial, a Hawaiian bank he helped found in 1954. In the past year, the bank shares dropped 79% in value, was severely under capitalized before it was rescued by a $135 million bailout even though the Federal Deposit Insurance Corp. had decided it didn't meet criteria from Treasury's $250 billion rescue plan for "healthy" banks.
This story goes beyond that of Washington power brokers and the influence they hold on the federal bureaucracy. It is a partial answer to "what are friends for" that totally disgusts homeowners, in particular, who don't have access to politicians with political clout.
The story, researched for the Post by ProPublica, an independent, nonprofit newsroom that produces investigative journalism in the public interest, claimed one telephone call from Inouye's staff tipped the scales in which Treasury approved the bailout.
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 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.
Both the FDIC and the Treasury said the decision was not affected by the involvement of Inouye's office. Here is an excerpt from the Post story:
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, 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.
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.