U.S. Rep. Maxine Waters, who is under investigation for using her influence to help aid a bank in which her husband held investments, confided to a fellow lawmaker that she felt conflicted about what she was doing but did eventually interceded anyway, according to a newly released report from the House Office of Congressional Ethics.
Waters, a Democrat from California, is accused of helping to secure meetings between OneUnited Bank and Treasury officials in 2008. The Boston-based bank received $12.1 million in taxpayer capital through the Troubled Asset Relief Program in December of that year. The House's ethics committee has concluded that Waters likely had a conflict of interest in arranging those meetings, since her husband served on the board from 2004 to 2008, and he had between $250,000 and $500,000 worth of investments in the bank.
Last year, the House panel began examining Waters. The report released Monday is a year old but was made public for the first time. The ethics committee has convened a panel that will eventually hold a trial to determine if Waters did, in fact, violate the rules of the House.
The report found that Waters may have violated rules regarding conflicts of interest when she contacted then-Treasury Secretary Henry Paulson to request that Treasury officials meet with representatives from the National Bankers Association. Ultimately, OneUnited was the only bank to be independently represented at the September 2008 meeting.
At issue was how the Treasury Department had structured the conservatorship of Fannie Mae and Freddie Mac, which Waters argued could cause a disadvantage for minority-owned banks. OneUnited, which bills itself as "the first black-owned Internet bank," was suffering, since its investments in the two government-sponsored enterprises had declined sharply in value.
The report noted that Congress had a legislative fix for banks that suffered because of their investments in Fannie and Freddie preferred stock -- allowing them to write off the entire value of the stock in a single year. But OneUnited's exposure was so extensive that the fix wasn't enough.
House legislation was eventually created to allow a bank that would be ineligible for TARP to qualify if the reason for its capital problems was its Fannie and Freddie stock.
According to the report, Paulson said Waters did not mention OneUnited during her call, nor did she mention her financial interest in the bank. Instead, according to Paulson, she merely said she had "some people in town who were important to her" that wanted a meeting with Treasury to discuss the issue.
Later, Paulson told Waters he was expecting more members from the National Bankers Association and had expected a larger turnout.
According to the report, Rep. Barney Frank (D-Mass.) reported that Waters told him she was torn about whether to intercede on OneUnited's behalf, due to her husband's involvement in the bank. The report does not name Frank by name and refers to him only as "Representative A," but it also noted that Representative A is chair of the House Financial Services Committee, and that position is held by Frank.
"According to Representative A, she knew she should say no, but it bothered her," the report states. "It was clear to Representative A that this was a 'conflict of interest problem.'"
The report goes on to state that the representative advised Wasters repeatedly to "stay out of it" and that he was willing to intercede on the bank's behalf, but she went ahead and contacted Paulson anyway.
In a statement released Monday, Waters denied violating any House rules. She insisted that the meeting was scheduled and requested by the National Bankers Association and was not inspired by OneUnited.
"(T)he suggestion that I could gain personally from one phone call made to assist the National Bankers Association in getting a meeting with the Treasury Department is not credible," Waters wrote. "Even the (Office of Congressional Ethics) acknowledges that the meeting resulted in no action. Although it leveled the accusation, the OCE also failed to show that I received any benefit or engaged in any 'improper exercise of official influence.'"