Zombie Update: OneUnited Stumbles On

Thomas Brown, Bank Stocks, June 28, 2011

Here’s a question I asked around this time last year, and still have yet to come across a good answer to: why in blazes is OneUnited Bank still in business?

Do you remember OneUnited? Here’s a hint: it’s the country’s largest minority-owned bank, with $535 million in assets. Here’s another: it’s Maxine Waters’ favorite financial institution.

Ah, now you recall! OneUnited was the bank Waters intervened on behalf of with regulators (apparently under false pretenses) back when the government was doling out TARP money. Strictly by the numbers, the company would only survive with the help of egregious special treatment by the government. A $50 million hole had just appeared in its balance sheet, after its portfolio of GSE preferreds collapsed when the government stopped paying dividends. So the FDIC–over the loud objections of staffers–went to extreme lengths to keep the company on life support. For instance, the agency allowed OneUnited to recognize $20 million in future tax benefits, from stock losses, as capital. (OneUnited was the only bank under the FDIC’s jurisdiction to get such an exemption.) And when the company was awarded $12 million TARP money (again, over the objections of FDIC staff), the FDIC let OneUnited count it as capital before it even received the funds. Later on, an FDIC official complained in an e-mail that the special treatment OneUnited got was “a travesty of justice”–which, of course, it was.

(Waters neglected to mention at the time, by the way, that she had a particular interest in OneUnited not collapsing, inasmuch as her husband was a major shareholder and once sat on its board. The House Ethics Committee is looking into the matter.)

{snip}

Nor is its asset quality a thing of beauty. At the end of the first quarter, non-performing assets stood at 5.55%, while the bank’s loan loss reserve was just 1.0%, or only 26% of nonperforming loans. The company has missed paying its last nine consecutive TARP dividends. By any realistic accounting, OneUnited is insolvent.

This would be a sorry enough tale if OneUnited had actually been doing some good on the lending side, by financing worthy minority borrowers that larger lenders had overlooked. Wrong. Prior to Waters’ intervention in 2009, OneUnited was perhaps best known as the being the bank that owned a 3,200-square-foot beach house in Malibu (and a Porsche SUV in Boston) for use by its CEO. That same CEO, Kevin Cohee, was arrested for cocaine possession in 2007.

{snip} So the help OneUnited has provided minority borrowers essentially rounds to zero.

Why is this bank still in business? {snip} Here are some flagrant, abusive, long-lived excesses–many of which [Sheila] Bair and her crew have enabled. After extending so many lifelines, for so long, to such a politically favored bank, the FDIC may feel too embarrassed to step up and do what it should have done awhile ago. OneUnited has already gotten too many benefits from the taxpayer. Bair’s FDIC should finally do what it’s done to so many other banks (many of which weren’t in nearly as bad a shape as OneUnited.) Shut it down!

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  • Question Diversity

    The black owned bank in St. Louis, Gateway Bank, never wrote any subprime mortgages, and mysteriously, neither the Justice Department nor the local community activist rabble ever compelled them so.

  • Anonymous

    Amazing how long it takes the House Ethics committee to act in even the most flagrant of cases. Of course Maxine is protected by the powerful Congressional Black Caucus, an openly racist special interest group that works within the walls of Congress.

    A few clips to provide color;

    From an article by MSN August 9, 2010

    – OneUnited had “Tier 1 capital” of just 1.8 percent of assets. Of the 363 banks that got TARP money in the fourth quarter of 2008, at the height of the financial crisis, that was the lowest Tier 1 ratio.

    – OneUnited is one of only a few banks to be under a federal supervisory enforcement order at the time it received TARP funding.

    – On Oct. 27, 2008, the Federal Deposit Insurance Corp. and Massachusetts Division of Banks issued a cease-and-desist order to OneUnited. The order, which is still in effect, said the agencies “had reason to believe that the Bank had engaged in unsafe or unsound banking practices and violations of law.”

    From The Wall Street Journal March 12, 2009

    – “Ms. Waters and her husband have both held financial stakes in the bank. Until recently, her husband was a director. At the same time, Ms. Waters has publicly boosted OneUnited’s executives and criticized its government regulators during congressional hearings. Last fall, she helped secure the bank a meeting with Treasury officials.”

    – “Ms. Waters, who represents inner-city Los Angeles, hasn’t made a secret of her family’s financial interest in OneUnited. Referring to her family’s investment, she said in 2007 during a congressional hearing that for African-Americans, “the test of your commitment to economic expansion and development and support for business is whether or not you put your money where your mouth is.”

    – “OneUnited’s executives have donated $12,500 to Ms. Waters’s election campaigns.”

    “At a hearing on minority lending in 2007, Ms. Waters criticized regulators for not doing enough to help minority banks stave off mergers with non-minority institutions. The lawmaker said she had contacted the Federal Deposit Insurance Corp. in 2002 over such concerns…”

    Visit Youtube for Maxine Waters, She is the worst mix of arrogance, ignorance and bluster. The evidence is so damning, yet Congress can’t make a move for fear of what? Perhaps after the William Jefferson and then Charlie Rangel debacles, they don’t want to seem racist. Soon the Congressional Black Caucus will claim they are being singled out for punishment.

  • sbuffalonative

    “Why is this bank still in business? {snip} Here are some flagrant, abusive, long-lived excesses—many of which [Sheila] Bair and her crew have enabled.”

    Another new motto to live by; ‘Too black to fail’.

  • Question Diversity

    2:

    Soon the Congressional Black Caucus will claim they are being singled out for punishment.

    Already have:

    http://goo.gl/dQHoC

    Keep in mind this was in 2010, when the Democrats/Pelosi still ran the House Ethics Committee.

  • Forrest

    I would Never call any black a zombie.

    Why would I want to insult a zombie?