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08-04-2010 12:45 PM
FinReg: Democratic Rep. Maxine Waters' banking scandal is a cautionary tale about the Congressional Black Caucus, a group that's enjoyed little scrutiny while influencing major legislation.
The 42-member caucus helped write whole sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act that have more to do with advancing its radical redistributionist agenda than heading off another crisis. Both Waters, D-Calif., and Rep. Charlie Rangel, D-N.Y., are caucus leaders, and both face trial for serious ethics breaches.
Waters, a member of the powerful House Financial Services Committee, may have violated conflict-of-interest rules by intervening on behalf of a failing black bank to which she had personal financial ties.
She helped secure Boston-based OneUnited Bank a meeting with Treasury officials — along with a subsequent $12 million in TARP funds — without mentioning to the officials her husband's financial ties to the bank, which also has operations in Los Angeles.
Her husband sat on the board of OneUnited — the nation's largest black-owned and managed bank — and at one point the couple owned as much as $500,000 in bank stock (holdings that Waters had listed on her annual financial-disclosure statement).
Troubled OneUnited was hardly a prime candidate for TARP funding, which was intended for healthier banks to jump-start lending. The community bank received the millions in aid even though the FDIC had cited it for risky lending and executive pay abuses, including buying a Porsche for executive joy rides.
Waters served as a conferee hammering out the final draft of the finance-overhaul bill. Not surprisingly, the Dodd-Frank Act exempts such community banks from enforcement and any examination by the newly created watchdog — the Consumer Financial Protection Bureau.
And there are "impact protections" against the feds unwinding any zombie bank with a sizable portion of loans in the minority community.
It was Waters who inserted the amendment that creates 20 offices of "minority inclusion" at financial agencies, including the Federal Reserve. The new diversity cops will police hiring of minority workers and contractors.
The Black Caucus is now thoroughly tainted by financial corruption. Yet it had perhaps the biggest hand in writing sweeping new financial regulations for every financial institution from Wall Street to Main Street — with the exception of minority banks and Washington-based Fannie Mae and Freddie Mac, which also escaped reforms.
The congressionally chartered mortgage giants have long enjoyed the protection of the caucus, which has seen to it they face minimal oversight as long as they fulfill their "affordable housing" mission benefiting minorities. Fannie and Freddie, in turn, have donated generously to the caucus and its foundation.
Waters even defended ex-Fannie CEO Franklin Raines against indefensible financial abuses last decade. He was found guilty of cooking Fannie's books to line his pockets.
Now, despite a clear conflict of interest, she and other caucus leaders assigned to the House conference committee on bank change exempted black banks and other institutions who lend to communities of color from the new oversight, even though they issued high-risk mortgages that consumers couldn't pay.
This is outrageous racial preference and patronage. Republicans should pledge to repeal, at a minimum, these discriminatory provisions of the act should they regain control of Congress.
Dodd-Frank is a massive redistribution scheme camouflaged as reform. Far from reforming easy credit practices, the law encourages more of the same reckless, politically mandated lending that brought down the entire financial system in the name of "affordable housing."
Turns out Frank, who serves the Boston area, also stepped in to save OneUnited, whose mission according to its Web site "is to finance affordable housing in urban communities." He admits speaking with a federal regulator to argue that losing the bank would be a "social tragedy."
"We did say, yes, I thought it would have been a social tragedy if the one minority bank in Massachusetts that has been working so hard and had been overextended into housing was to be wiped out by federal action," Frank said. "And that's why I think it was important to try to help them."
This is the wrongheaded thinking that went into the biggest bank regulatory regime since the Great Depression. Making an exception for minority banks defeats the whole purpose of reform, which is to protect all consumers against systemic risk.
So no, Mr. Frank, you're wrong: The real "tragedy" is that taxpayers will be on the hook for more bailouts to support your and the Black Caucus' social goals.
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