Recently, a too-small-to-save community bank in Bridgeport, Connecticut failed. So far, so what? If it's not run by the likes of Jamie Dimon, you know it's not going to get a bailout. In fact, the bank had been denied TARP capital. What's an interesting wrinkle in this sob story is that the bank. the state's only minority-owned bank, had lined up a White Knight, one Donald J. Vaccaro, who had the cash to buy and recapitalize the bank and was raring to go. Unfortunately for him, the state and federal banking regulators determined that he just couldn't pass the "integrity test."
Did he machine-gun a busload of nuns? Strafe an orphanage? Break wind in the vicinity of an open flame? No, something much worse: he was arrested (but never convicted) of a "hate crime." The "crime" was uttering a racial epithet.
State and federal regulators got stuck on Vaccaro's arrest, which happened in 2012 at an Oscar party in Hartford, on the felony charge and four misdemeanors. He allegedly was bounced out of Real Art Ways when he allegedly grabbed one woman's breasts. He later allegedly told the bouncer, "You never should have touched me, you black mother-[expletive]," according to police.
Vaccaro has consistently denied that he touched anyone or used any racial slurs.
He was granted accelerated rehabilitation by the courts, a special form of probation that would erase the record of the arrest if probation is successfully completed. The probation period has been shortened once, and is now set to end in February.
Let's leave aside the First Amendment implications of the entire concept of "hate crimes." There's no sense in opening up that can of worms. If Vaccaro in fact uttered such a racial slur, it certainly would not make him the preferred provider to capital to Connecticut's only minority-owned bank, would it? Yet, here was the bank's founder seeking his capital. Not only that, the NAACP publicly gave Vaccaro a clean bill of health reputation-wise and supported his proposed acquisition of the bank. In light of that, you'd think that the regulators' fears of "reputational risk" (cited by the state banking authorities) would be assuaged. If he'd insulted Norwegians ("You never should have touched me, you pasty-faced mother-[expletive]," of course, then I doubt he could have effectively marshaled a respected Scandinavian-American advocacy group to come to his aid. But in this case, the premier advocacy organization for the minority group he'd allegedly insulted told the world that the guy was not a "hater."
In addition, it seems to me that the accelerated probation is indicative of the fact that the local authorities did not consider him a serious offender. Once probation was completed, which was to be in less than six months, the crime would be expunged from the record. It would have been as if it had never happened. So, doesn't it seem a tad unfair to base your decision primarily on an arrest for a crime that will, shortly, have never existed? I realize that bank regulators regularly time travel through worm holes, so everything that has ever happened or will happen is, for them, occurring right now, but still...
The bank's founder and CEO, Peter Hurst, put it poignantly.
"It was one bad night in February 2012," Hurst said. "Should that be enough to let a bank fail? I just don't get it. I don't think I ever will."
In the interest of fairness (which is seldom a concern on this blog), the linked story discusses the Federal Reserve Board's "stinging" letter of rejection of Vaccaro's application, delivered after the bank failed, which cites other "unexplained" past arrests of Vaccaro and investigations of Vaccaro-related enterprises. None of those incidents appeared to present hurdles that could have not been leaped, however. In addition, the state banking commissioner's comments make clear that the primary factor in the rejection of Vaccaro's application was the hate crime arrest.
To cut the chase, the regulators didn't think that Vaccaro was their kind of guy. Which, in a sane world, might be a reason to praise Vaccaro, not to bury him.