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In last night's post, I made the heinous error of blaming the OTS for the shortcomings of the FDIC. That's like slapping a little baby when you should be having Chuck Norris roundhouse kicking the baby's adult uncle in the face. Or, as alternative to Chuck, you could sic Ken Thomas on them.
Ken, a banking consultant, economist,and professor of finance at University of Pennsylvania's Wharton School, was quoted in the article I linked to yesterday. He's a blunt critic of the favoritism he believes was shown to OneUnited Bank in its campaign to get TARP money out the Treasury Department. According to the South Florida Business Journal, It turns out that's not the only thing about OneUnited and federal banking regulators that gets Ken's goat.
Three years before a congresswoman faced an ethics investigation related to OneUnited Bank, banking analyst Kenneth H. Thomas was mystified that regulators did not crack down on the bank for minimal lending in South Florida.
The nation’s largest African-American owned bank had only 17 loans totaling about $3 million in South Florida in 2005 and 2006, even though it had $77 million in deposits in the region, according to FDIC figures and an analysis by Thomas.
The Boston-based bank was rated “in substantial non-compliance” under the community reinvestment act in South Florida by the FDIC. It got a “satisfactory” rating overall, but Thomas filed comments arguing for a lower rating.
The passing grade may have been crucial to helping the bank qualify in 2008 for $12 million in troubled asset relief program (TARP) funds.
“There’s no way the bank should have passed,” said Thomas, who is based in Miami. “At the FDIC, someone just looked the other way and gave them the rating that the bank wanted – and that’s a satisfactory – because if they didn’t, that would have hurt the bank.”
The complaints by Thomas to the FDIC in 2007 had the same effect that a water balloon has on a raging forest fire. OneUnited Bank continued to make almost no loans in South Florida while it continued to suck up deposits from branches in the area, apparently in order to invest the funds elsewhere.
OneUnited has granted just three mortgages totaling $419,000 in South Florida since the start of 2008, according to court records. None of those loans were in Liberty City or Lauderdale Lakes, where the bank’s branches held $59 million in deposits as of June 2009.
“Oh my gosh. That’s tragic,” Miami-Dade Chamber of Commerce President Bill Diggs said. “If they’ve got that kind of money in deposits and they’ve only made three loans totaling $400,000, that is troubling to me.”
Oh my gosh, you're right, Bill. What's more, opening or acquiring out-of-state branches to use primarily as deposit-generating devices while you fail to make loans to the local community where the branches are located is a violation of law. Too bad federal law doesn't apply when the main squeeze of a powerful member of Congress owns a piece of the bank that otherwise would be subject to it.
I'm going to love to see what else crawls out from under the rocks that are overturned during this ethics investigation. I'm sure the FDIC can't wait, either.
