Barney Frank (D-Mass.)and Maxine Waters (D-California) went to great lengths arranging a federal bailout for OneUnited, a small minority-owned bank in the Boston area. Waters had close ties to the bank: she and her husband both had held financial stakes in the company and her husband had served as a director. Waters had tried to burnish the image of the bank's executives and criticized regulators for their scrutiny of the bank. Both Representatives trumpeted the role the bank played in its community, in particular providing loans to local citizens to help them afford, among other things, homes.
Turns out that was hogwash.
The Boston Globe has a scathing article that reveals the bank to be poorly run, to have ignored its own community, and to have indulged its executives with a high-living lifestyle. Indeed, the bank also made claim when it sought federal funds that it was merely trying to help its community. But the recipients of these loans are a far cry from the sort of customers the bank referred to in its Sept. 6 letter to the US Treasury: "Unlike majority banks, which principally focus on profit, the express mission of minority banks is to promote these underbanked, underprivileged communities," the bank's chief counsel, Robert Cooper, wrote.
Cohee insists the bank makes loans to people of all incomes. But James Campen, a University of Massachusetts economics professor who studies mortgage lending in city neighborhoods, called the lack of home lending by OneUnited "a shame."
"If they were a full-service bank committed to local neighborhood needs, part of that would be providing mortgages," Campen said.
Then there were the perks enjoyed by bank executives.
But the bank's trouble went beyond its capital issues. Regulators in October concluded in a cease-and-desist order that OneUnited also had poor standards for qualifying and documenting loans, and gave top executives excessive pay and perks.
Two of the perks regulators targeted were a $6.4 million beachfront Santa Monica mansion Cohee used while in California and a Porsche SUV he drove on company business in Boston. As ordered by regulators, the car has been sold and the bank is no longer paying for the house, which Cohee said he is selling.
Cohee said the house and car were necessary for conducting business -- and modest compared with the jets and fleets of vehicles that larger banks often have.
"This wasn't some excessive spending splurge thing. This was a calculated decision to provide housing for our executives when they would travel from Boston and Miami to L.A.," Cohee said. "We wanted the bank to have an image of stability in the community."
A Porsche and a 6 million dollar (and change) mansion in Santa Monica are the very image of stability. At least to some people.
How much attention will this indulgence-that certainly impacted the financial health of the bank and played a role in the need for federal bailout funds-receive
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