By B.J. Reyes
U.S. Sen. Dan Inouye is taking some heat from a story in today’s Washington Post.
The story details how Central Pacific Financial, which was founded in part by Inouye and “where he has invested the bulk of his personal wealth,” received $135 million in federal bailout money after a phone call from Inouye’s office.
From the story:
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm’s losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn’t meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye’s office, Central Pacific announced that the Treasury would inject $135 million.
Inouye did not speak to the Post for its story, but issued a statement today saying his office did nothing more than leave a voicemail message inquiring whether the bank’s application for the funds under the Troubled Assets Relief Program (TARP) had been received.
The entire statement from Inouye released by his office:
“When Japan attacked Pearl Harbor on December 7, 1941, several things happened almost automatically. Japanese banks operating in the United States were closed and confiscated. In Hawaii, as a result of the large number of immigrant Japanese who had come to Hawaii to work for the plantations, these closures caused many Japanese immigrants to lose their life’s savings.
“And throughout the war, if you wanted to do any banking business, you had to do it with the other banks that were available and many of these banks were not operating with immigrants in mind, so there were language difficulties and such. In addition, the political climate was bad. Japanese Americans were considered enemy aliens.
“So when the war ended — we, as war veterans, not bankers — decided to establish a bank to provide banking services to the Japanese immigrant community. And that’s how we started. The minimum share was $300, so it made it possible for everyone to buy shares. It was not a big bank. Although I knew very little about finances, because I was one of the negotiators, I ended up as Secretary. I bought the minimum amount because I could not afford buying more than the minimum. That is the history of my initial involvement with the Central Pacific Bank.
“Much more recently, at the time of the original TARP vote, the Secretary of the Treasury told us the United States faced a banking crisis that threatened our entire economy, and that the Congress had to take immediate action. Based on his testimony and my belief that the nation did indeed face a potentially devastating blow to our banking system, I voted in support of TARP. As a founding incorporator of Central Pacific Bank, before Hawaii was even a state, I continue to be very proud of my affiliation with the institution, even though that affiliation has been limited to that of a shareholder for many years.
“With regard to the phone call placed to the FDIC by one of my Legislative Assistants, I would note that the Legislative Assistant did not speak with anyone at the FDIC office, rather they simply left a voicemail message seeking to clarify whether Central Pacific Bank’s application for TARP funds had actually been received by the FDIC. Soon thereafter, Central Pacific Bank was notified that their application had been received, and that closed the matter. This single phone call was the entire extent of my staff’s contact with regard to Central Pacific Bank, to any outside agency.
“I would conclude by stating that I supported the original TARP legislation including the procedures created in the legislation that were then used to decide which financial institutions would receive TARP funds. Neither I nor my staff took any action that would undermine the independence of those procedures.”
