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In Defense of OneUnited Bank…and Rep. Barney Frank

To have Bill O’Reilly, the Wall Street Journal, and the Boston Herald, on your back at the same time, the nation’s first Black-owned Internet Bank, with multiple branches in Miami, Los Angeles, and Boston – OneUnited – might actually be doing something right.

It would be hilarious, if it weren’t so hypocritical and real, to hear supposedly free-market oriented ideological conservatives and others depict a bank that received only $12 million out of a pool of $700 billion in government funding [from the Troubled Assets Relief Program (TARP)] as the poster child for influence peddling and greed.

What’s really going on here?

First, an important set of facts:

1) OneUnited Bank is a product of the civil rights movement era and empowerment efforts to ensure access to capital in minority and economically distressed communities. Its development and capitalization has been supported by stakeholders of all races. The Bank began nearly 50 years ago with the opening of Unity Bank & Trust in Boston, Massachusetts. As the Bank itself accurately notes, “OneUnited Bank was established by combining Black-owned banks across the country with the same mission -Founders National Bank of Commerce in Los Angeles, Family Savings Bank in Los Angeles, Peoples National Bank of Commerce in Miami and Boston Bank of Commerce (the predecessor to OneUnited Bank)…”

2) OneUnited Bank’s capital position was not exposed by the mortgage crisis. It wisely steered clear of subprime lending, and unlike many multi-national banks, does not have a slew of foreclosed properties on its books. As a result, unlike other recipients of TARP money, OneUnited Bank is not producing property value reducing eyesores in communities throughout this country.

3) For the past five years, OneUnited Bank has been awarded the highest Bank Enterprise Award by the U.S. Department of Treasury for its community development lending. For well over a decade, OneUnited Bank has been designated by Treasury as a Community Development Financial Institution (CDFI) due to its innovative community development activities that rebuild distressed and neglected communities through a variety of lending, investment, social support and educational activities. This award and designation is not arbitrary, but is rather based upon precise data regarding the activities of a bank in specific distressed communities as determined by census information.

4) OneUnited Bank’s problems were rooted in the fact that it held stock in two Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac – a common and conservative practice utilized by many banks, and even encouraged by the U.S. government. When the federal government nationalized Fannie Mae and Freddie Mac it did so in a manner that damaged shareholders in both entities. There is evidence that the U.S. government provided assurances (made prior to the takeover) to institutions holding preferred stock in Fannie Mae and Freddie Mac - that any possible takeover would protect them. This proved not to be true.

5) OneUnited Bank experienced 10 consecutive years of profitability, and after writing down the GSE-related losses for the 3rd and 4th quarters of 2008, is back to being profitable again this year.

6) Rep. Barney Frank has no financial stake in OneUnited Bank and has not received a single campaign contribution from any of the bank’s executives.

Now, with these actual facts established, we can draw rational inferences and make reasonable interpretations.

The controversy reached mainstream proportions when OneUnited Bank was singled out in a January 27, 2009 Wall Street Journal article, ‘Political Interference Seen In Bank Bailout Decisions.’ Note the plural word ‘decisions’ in the headline. A media frenzy of op-eds, editorials, and loud mouth talking head commentary ensued – relying solely on this article, fed by biases and interests projected onto it, in turn impacting any proper interpretation based on facts.

With the possible exception of Media Matters ( I have not found a single published instance of investigative or original reporting – in ‘Black,’ mainstream or alternative media – conducted in order to get to the truth of the Wall Street Journal’s insinuations.

This is surprising since even a cursory glance at the Journal’s reporting makes it obvious that OneUnited is receiving undue attention and being depicted unfairly.

Although the WSJ article clearly implies that Alabaman elected officials were much more involved in possibly influencing TARP funds going to banks in their state, the article uniquely focuses on a small Black-owned bank’s relationship with a single Member of Congress, Rep. Barney Frank. Consider this portion from the Journal article:

The slow process infuriated Alabama officials. The same day that Colonial announced its application had been approved, Trabo Reed, Alabama's deputy banking superintendent, wrote a letter to Rep. Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee, complaining that the government had dragged its feet and kept banks and state officials in the dark. The letter didn't specifically cite Colonial (which had no comment).

Rep. Bachus's office forwarded the letter to the heads of bank regulatory agencies and asked them to examine the situation. Since the letter was forwarded, two more Alabama banks have received TARP funding. Five Alabama banks, including Colonial, are slated to collect a total of about $4.2 billion.

In all, about 50 state-chartered Alabama banks applied, according to state banking superintendent John Harrison. He says his office helped shepherd them through the process, figuring that "the more applied, the more had the chance to get it."

Mr. Harrison says that in addition to Rep. Bachus, Alabama Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, "has been a big proponent for Alabama state-chartered banks...and he was really concerned that the TARP money went here." The banking official added: "We're blessed with a U.S. senator that was on the banking committee and Spencer Bachus being the ranking Republican" on the House panel. "I think [the Treasury] got the message.”

Now, I have nothing against Alabama (I have family from there), its banks or its elected officials, if any of the above is true. My concern is why does a single bank that received $12 million in TARP funds, after an interest was taken in it by a single elected official receive more attention than five banks slated to receive $4.2 billion, after an interest was taken in them by an entire delegation of elected officials?

Perhaps, even more importantly, why is any of this an issue of ‘influence peddling’ or ‘political interference’ when as the WSJ notes, “At a hastily arranged meeting on Oct. 13, then-Treasury Secretary Henry Paulson basically forced the chiefs of the country's nine biggest banks to accept cash infusions. The government invested $125 billion in the nine. Citigroup Inc. and Bank of America Corp. subsequently returned for more money.”

We’re supposed to accept 9 banks receiving $125 billion, against their will, because of the personal intervention of the Treasury Secretary of the United States but reject 1 bank getting $12 million, even when a link between lobbying and the release of TARP cash can’t be proved?

[As an aside - a highly respected Congressional reporter, for a major publication -who happens to be White - seeking an interview with me on the controversy, emailed me the following, “Around the Capitol, a lot of people are talking about that WSJ story as if it exposed something nefarious, but I'm not so sure. It seems to me that what Frank did was pretty straightforward and pretty reasonable. He mentioned in a different story that there's a massive gulf between elite opinion and general opinion with regard to TARP and that he's trying to close that.” In targeting OneUnited Bank, it appears that many are taking advantage of this ‘massive gulf between elite opinion and general opinion with regard to TARP.’]

It is striking to see so many trip all over themselves to attempt to prove some type of sinister affirmative action lobbying complex operating in secrecy, when Rep. Barney Frank openly states why he sought to help OneUnited Bank. Again, even the January 27th article that started this whole mess makes that clear: “Mr. Frank says that in order to protect OneUnited Bank, he inserted into the bill a provision to give special consideration to banks that had less than $1 billion of assets, had been well-capitalized as of June 30, served low- and moderate-income areas, and had taken a capital hit in the federal seizure of Fannie Mae and Freddie Mac. ‘I did feel that it was important to frankly try and save them since it was federal action that put them into the dumper,’ Mr. Frank says.”

Woops – you mean to tell us One United Bank was actually well-capitalized? Woops – you mean to tell us that it is important that OneUnited served ‘low-and moderate-income areas’ (by the way -why doesn’t the term ‘systemic risk’ ever apply to poor and distressed Black, Latino, Asian, and White areas?) Woops – you mean to tell us that it was ‘federal action’ (the way in which the U.S. Government destroyed shareholder value with its Fannie and Freddie bailout) that hurt OneUnited Bank?

I know it’s 2009 and we have a Black president and all, but perhaps a White Member of Congress assisting a Black-owned bank because it is the right thing to do (and which hasn’t given him a single campaign contribution) is the best evidence yet of a post-racial America.

Oh…I almost forgot the best part of this story – one of the Bank’s executives, had a Porsche, which bank regulators told OneUnited to get rid of, and the bank complied.

Later for that $12 million in TARP cash, now I have a real problem – in fact I’m shocked, shocked to hear of a Black bank executive driving a Porsche in Hollywood of all places.


We need a real investigation… to find out what color it was.

Cedric Muhammad is a political and monetary economist and Publisher of ( He is also the Convener of the Black Bank Initiative (BBI) ( dedicated to promoting financal literacy, wealth creation and community development. Mr. Muhammad can be reached via e-mail at cedric(at)

-February 9, 2009

Cedric Muhammad

Thursday, February 19, 2009

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