One of the problems with the idea of the taxpayer bailout of any industry or financial institution with the right connections is that the right connections matter. Many (not all) Congressmen love to bring home pork or money for their districts or states. Massachusetts was the poster child for that idea with the ‘big dig’, a highway project that went massively over budget and then had major problems. Well, Massachusetts is still looking for federal money (despite high state taxes and major revenue problems of its own).
According to the Wall Street Journal, Representative Barney Frank interceded on behalf of Boston’s OneUnited Bank, and the bank received $12 million of the TARP program money. The Treasure Department had stated that it would give money only to healthy banks, to jump-start lending. OneUnited Bank was not a healthy bank. Aside from its cash flow problems, there were other issues. According to the article:
“On Oct. 27, the FDIC and Massachusetts bank regulatory officials, alleging poor lending practices and executive-compensation abuses by OneUnited, slapped it with a strong enforcement action, a cease-and-desist order. Among other things, the officials told the bank to get rid of a 2008 Porsche for executives.
Mr. Cooper, the bank’s attorney, dismisses the order as a “hastily cobbled together” action. “What we are talking about is a hiccup, a blip on the screen of an otherwise-stellar enterprise,” he says. Asked whether the bank had sold the Porsche, he said only that it was complying with the order.”
This is not wise spending of our tax money. It leads me back to the idea that the only way to fix Congress is with term limits. With few exceptions, our Congressmen are not working for us–they are working to fill their own pockets and to stay in office. It would be interesting to check the net worth of an incoming Congressman with his net worth upon leaving office and see how the two numbers compare.