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Barney Frank: An example of why the democrats cannot be trusted with large sums of money ...

The problem with democrats is they cannot divorce special interest politics and money from their legislative decisions. And one of the most powerful legislators in Congress is House Financial Services Chairman, Barney Frank.

Lack of judgment …

  • One, the House Ethnics committee reprimanded because he "reflected discredit upon the House" by using his congressional office to fix 33 parking tickets for his gay lover.

According to reports, Frank paid Gobi $80 for sex and then “tried to rehabilitate the drug-using prostitute by hiring him to run errands and lending him the use of his apartment.

Members of the House Ethics committee was said to believe Frank when he denied any knowledge of the prostitution ring being run out of his residence.

  • Two, nobody complained when Frank engaged in a gay relationship with Herb Moses, an executive at Fannie from 1991 to 1998, where he helped to develop affordable housing and home improvement lending programs for Fannie Mae. Especially when Barney Frank’s committee was actively resisting bi-partisan calls for the reform of Fannie Mae and Freddie Mac and creating “affordable housing” legislation. Even though Frank witnessed first hand the corruption in both institutions, where there the management of both institutions allegedly cooked the books to earn hundreds of millions in executive bonuses. Frank continued to tout the safety and soundness in the months prior to the collapse of both institutions into a federal conservatorship. 
  • And three … Frank continues to infuse special interest politics with the allocation of banking bailout funds under the TARP (Troubled Assets Relief Program); which is the subject of this blog entry.

An example of Frank’s intervention …

According to the Wall Street Journal …

“Troubled OneUnited Bank in Boston didn't look much like a candidate for aid from the Treasury Department's bank bailout fund last fall.”

“The Treasury had said it would give money only to healthy banks, to jump-start lending. But OneUnited had seen most of its capital evaporate. Moreover, it was under attack from its regulators for allegations of poor lending practices and executive-pay abuses, including owning a Porsche for its executives' use.”

“Nonetheless, in December OneUnited got a $12 million injection from the Treasury's Troubled Asset Relief Program, or TARP. One apparent factor: the intercession of Rep. Barney Frank, the powerful head of the House Financial Services Committee.”

Mr. Frank, by his own account, wrote into the TARP bill a provision specifically aimed at helping this particular home-state bank. And later, he acknowledges, he spoke to regulators urging that OneUnited be considered for a cash injection.”

Who is OneUnited …

Capture1-22-2009-5.07.32 PM

According to their web site … 

“OneUnited Bank is the first Black-owned internet bank, the first Black-owned interstate bank and the largest Black-owned and managed bank in the country with offices in urban communities of California, Florida and Massachusetts. Its mission is to provide affordable financial services to support economic development in urban communities and maintain superior financial performance to maximize shareholder value.”

The Bank's operations consist primarily of originating and purchasing mortgage loans - with a focus on urban and low-to-moderate income communities - and funding that activity with the gathering of affordable FDIC insured deposits. The Bank supplements mortgage lending activities with additional interest-earning assets such as United States Government Agency securities and mortgage-backed securities and funding sources such as advances from the Federal Home Loan Bank of Boston. The Bank generates fee income on deposit and loan accounts and, depending on market conditions, net gains on sales of securities and loans. The level of its expenses such as salaries and benefits, occupancy and equipment costs, other general and administrative expenses and income tax expense further affects the Bank's net income. The Bank's mission is to achieve superior financial performance.”

“The OneUnited Bank vision is to unite urban communities across America and build wealth. As an FDIC insured institution, with state-of-the-art technology, a dedicated and experienced branch staff and loan officers who know customers by name, with over a half a billion dollars in assets and locations from coast-to-coast, the Bank is ready to serve.” <Source>

And why is that a problem …

Far from being a sound and prudently run bank, the FDIC felt compelled to issue a “cease and desist” order that cited a number of self-serving management issues.

ORDER TO CEASE AND DESIST
IT IS HEREBY ORDERED that the Bank and its institution-affiliated parties, and its successors and assigns, cease and desist from the following unsafe or unsound banking practices and violations of law:

a. Operating with an inadequate level of capital for the kind and quality of assets held;

b. Failing to provide adequate supervision and direction over the officers of the Bank;

c. Operating without an appropriate risk management program that establishes acceptable risk exposure and ensures appropriate policies and practices are in place;

d. Allowing the payment of excessive compensation, fees and benefits to its senior executive officers;

e. Operating with an excessive level of criticized assets;

f. Operating without effective underwriting standards and practices;

g. Operating without an effective loan documentation program;

h. Failing to provide for an effective system to identify problem assets and prevent deterioration;

i. Engaging in speculative investment practices and failing to prudently diversify its equities portfolio;

j. Operating without a system to monitor and evaluate earnings and ensure maintenance of adequate capital and reserves;

k. Operating with deficient earnings;

l. Operating without sufficient liquidity, in light of the asset and liability mix and overall financial condition of the Bank; and

m. Committing violations of law and regulation.

Other issue include a party house in California, car leases and reimbursement of executive expenses …

6. (a) Within ninety (90) days from the effective date of this ORDER, the Bank shall rescind any and all lease agreements, contracts or arrangements with, and shall cease paying for any expenses related to, 703 Pacific Palisades Beach Road, LLC, its principals, successors or assigns.

(b) Within ninety (90) days from the effective date of this ORDER, the Bank shall sell all Bank-owned automobiles and other vehicles provided to or for the use of the Bank’s executive officers; and shall require all executive officers to reimburse the Bank for the fair market value of any automobiles or vehicles purchased by the Bank in the names of such executive officers or their related interests.
(c) Within ninety (90) days from the effective date of this ORDER, the Bank shall amend the supplemental health benefits for the Chairman of the Board, Chief Executive Officer and President, so that such benefits are comparable to those currently available to other executive officers of the Bank.

(d) Within sixty (60) days from the effective date of this ORDER, the Board shall engage a qualified independent consultant, acceptable to the Area Director and the Commissioner, to assess the appropriateness of all current and deferred compensation paid to the Chairman and Chief Executive Officer and the President, in light of each individual’s competence, responsibilities, and performance. The analysis will include a comparison of such compensation to that of Banks of comparable size and complexity, and, based on the forgoing analyses and comparisons, will identify an appropriate level of compensation for each individual. The analysis will also include a determination of the reasonableness of all perquisites, including, but not limited to items such as housing and automobile allowances and/or benefits.

By all accounts, the executives were running the bank in a manner which seems to be placing their self-interests over those of their shareholders and depositors. Not that these executives are any different from those in larger financial institutions. But what is different is that Barney Frank inappropriately interfered with those involved in making sound and prudent funding decisions. It is unknown if Barney Frank also had any contact with any regulatory agencies on behalf of OneUnited and/or its executives or directors.

Three strikes and you’re out!

These are only three of, heaven knows how many, special interest interventions in governmental affairs. This is more about Barney Frank’s judgment rather than his qualifications.

Not only did Barney Frank preside over the most stunning failure of our financial system in modern times, he apparently acted in such a manner as to bring about the collapse of the Fannie Mae and Freddie Mac.

If the democrats in the House of Representatives were as honorable and as ethical as they claim to be … they would refer this matter to the Department of Justice for investigation by a special counsel. 

Unfortunately, it is likely that Barney Frank will be allowed to continue to damage our financial system while those bubble-headed liberal loons in Massachusetts keep re-electing him to office.

Giving new meaning to “fannie” mae …

dish-barney-frank

Barney Frank with a friend.

What can YOU do?

Ask your elected officials how Barney Frank can be allowed to influence billions of dollars in bailout funds and craft new legislation regarding the housing markets when he has shown such spectacularly poor judgment in the past?

Also ask your elected officials why Barney Frank is not being investigated for possible illegal interference in bank matters on behalf of special interests and/or possibly  exerting undue influence on regulatory agencies associated with Fannie Mae and Freddie Mac?

Be well and be safe.

-- steve

Quote of the day: “A kleptomaniac is a person who helps himself because he can't help himself.” - Henry Morgan

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Reference Links:

Political Interference Seen in Bank Bailout Decisions - WSJ.com

ONEUNITED BANK ORDER TO CEASE AND DESIST|FDIC-08-294b

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