Email Warned That Bank Up For Bailout Was ‘Disastrous’
by Marian Wang and Paul Kiel ProPublica
The U.S. Treasury Department had just announced preliminary approval of $299 million in taxpayer support for California’s United Commercial Bank when the email landed.
“Wow… you guys are either making a big statement with this one or your ‘gatekeeper’ is incompetent,” warned the anonymous missive [1], sent in October 2008 to the Treasury and obtained by ProPublica through a Freedom of Information Act request. “This is one of the worst loan portfolios in the country run by one of the worst CEOs (and a lying CEO at that).”
The warning went unheeded. Treasury pushed ahead and provided United Commercial Bank [2] with funds under a part of the Troubled Asset Relief Program [3] that was aimed at bolstering healthy banks.
But within months of getting bailout funds, things began to unravel. The bank disclosed publicly in May 2009 that it was restating its 2008 financial reports [4]. It announced in July it would stop paying dividends on its stocks [5], including the shares bought by Treasury. In September, the bank’s audit committee wrapped up an internal investigation that found “deliberate and improper actions and omissions [6]” by certain bank officials. And in November 2009, United Commercial Bank became the first bailout recipient to fail [7], wiping out Treasury’s investment of almost $300 million [8].
Another bank, Florida-based U.S. Century, went into a similar slide right after receiving TARP funds, as we recently reported [9]. That bank is now on the verge of collapse, weighed down by poor-performing loans, some of them to insiders. (No executives at U.S. Century have been accused of wrongdoing.) While no emails warning the government against the Florida bank have surfaced, it was also approved for bailout funds — $50.2 million — despite red flags.
In the case of California’s United Commercial Bank, former executives now face civil [10] and criminal [11] charges. Federal officials also are moving to bar [12] former CEO Thomas Wu and nine other former executives from the banking industry altogether, citing their “personal dishonesty” and “a pattern of misconduct.” Two former executives — though notably, not the CEO — are the first senior executives at a bailed-out bank to face criminal charges. They are accused of hiding the bank’s loan losses from investors, auditors and regulators.
When the anonymous tip reached the Treasury, timestamps on the email chain show that it was quickly forwarded to upper-level Treasury officials, including Neel Kashkari, who was then Assistant Treasury Secretary and in charge of TARP. (A spokesman for the investment management giant PIMCO, Kashkari’s current employer, said he was traveling and unavailable for comment.) Other Treasury officials pulled the bank’s securities filings, which disclosed that the bank’s auditor, PricewaterhouseCoopers, declined to continue on as its auditor [13].
The email was also forwarded [14] to several FDIC officials with a note that said, “We were provided the following feedback on UCBH,” United Commercial Bank’s parent company. “Thought you should be aware. Let us know if you received similar feedback and how/if you are responding.” The Treasury Department funded the bank only after its primary regulator certified it was financially viable. That regulator was the FDIC.
“You always have to take anything you’re hearing from outside with a grain of salt,” said former Treasury official Jeb Mason, who noted that people giving negative feedback could have a short bet against the institution and therefore a financial interest in seeing it fail. “The best thing anyone at Treasury could reasonably do is pass that input along to examiners who are paid to make these judgments regarding an individual institution’s health.”
Both the Treasury Department and the FDIC declined comment on United Commercial Bank and how the email warning was investigated. A 2010 report by the FDIC’s inspector general, however, provides some clues.
“The FDIC and the Treasury considered the e-mail [15],” the report said. “But because the e-mail was from an anonymous source, its allegations were unsubstantiated, and UCBH met the Treasury’s eligibility criteria, [the FDIC’s Division of Supervision and Consumer Protection] did not change its recommendation decision.”
And yet, the report also noted that the FDIC “was aware of certain negative information [16]” about United Commercial Bank. If the agency had acted in 2008 to start giving the bank a more intensive type of review [17] typically reserved for more complex institutions, the report said, “the FDIC may have had additional information upon which to base its October 2008 funding recommendation.”
TARP’s bank programs as a whole are now turning a profit [18]—though the same can’t be said of other parts of TARP or the overall bailout [19], which includes the takeover of Fannie Mae and Freddie Mac. So far, 14 out of the 707 banks receiving Capital Purchase Program money — the program that funded United Commercial Bank — have failed, according to a Treasury official. That’s roughly 2 percent.
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Why am I not surprised by this??? Isn’t just more of ” their” plan? The banks know we have impotent government, regulations that are easy to maneuver around…and enforcement…HA, what’s THAT?
I say put my old fifth grade teacher” Sister Frances” in charge of regulation and enforcement. Trust me on this one…..there would be blood and dead bankster bodies stacked like cord wood.
What the F happened to “Simple” ? The more complex the more legal, the more legal the more complex and on and on to the point of collapse. To put it in simple terms “oh what a wicked web we weave when we first try to deceive”. Simple and to the point.
It is actually pretty simple….they are all full of shit…throw them all out of America!!
Diana Olick from CNBC just reported that the FOREIGN INVESTORS are buying up the FRAUDCLOSURES AND RENTING THEM BACK TO US…..THE FOREIGNERS ARE USING THIS AS IS THEIR VISA INTO THE U.S…..Their guest said this is not right….I say it is a disgrace!!!! DON’T LEAVE YOUR HOMES PEOPLE!!!! THE U.S. TAXPAYERS FUNDED THE BUILDING OF OUR HOMES AND THE PONZI SCHEME WITH FRAUDULENTLY INDUCED MORTGAGE PAYMENTS PAID OFF OUR HOMES…WE THE PEOPLE PAID OUR HOMES OFF MANY TIMES OVER.!!!.. FRAUDCLOSURES ARE A SCAM AND A FRAUD TO STEAL OUR HOMES THEY DO NOT OWN TO HAND OUR HOMES OVER TO THE FOREIGNERS ON A SILVER PLATTER…!!!!! THE U.S. GOVERNMENT ARE TRAITORS!!!!! THESE CROOKS NEVER LENT US ANY MONEY…NWO GLOBALIST PIG BASTARDS!!! Throw the politicians, their minions and cohorts and the FED out of America….or we will own nothing….we will be renting our own homes that the AMERICAN PEOPLE ALREADY PAID FOR…. from the foreigners who have never paid a dime of U.S. TAXES OR CONTRIBUTED A DIME TO THIS COUNTRY….EVER……..!!! THE U.S. GOVERNMENT ARE IN COLLUSION WITH THE NWO AND ARE AIDING AND ABBETTING THEIR GLOBALIST PIG PLAN…..THEIR HITLER PLAN…. IN STEALING OUR HOMES AND OUR COUNTRY UNDER THE GUISE OF DEBT THAT WE DO NOT OWE…. THE BIG BANKS, THEIR COHORTS AND MINIONS ARE INSOLVENT…BK ON PAPER…MASSIVE ACCOUNTING FRAUD……!!! NAZIS, ALL OF THEM!!!
Ivent; This is all good and to the point and it is nice you post it on this 4 Foreclosure Fraud comment section but this needs to “Get OUT” and get out NOW. Widely publicized network. Do you have a spot somewhere nationally? Try http://www.freedomsphoenix.com. As well written a person you are, you could get a column and spot on their page. Check it out.
Thanks Wayne, I will check it out…!