A controversy involving OneUnited Bank and the U.S. government’s bank bailout plan has raised questions about the relationship between banks and lawmakers and the status of minority-run banks in America.
The bank is facing allegations of impropriety after it received more favorable provisions than any other institution from the government during the financial crisis. U.S. Rep Maxine Waters (D-Calif.) is the politician embroiled in controversy, as she allegedly favored the bank — in which her husband had invested — over other, comparable banks during the issuing of bailout money.
Additional Benefits For OneUnited
OneUnited, the nation’s largest minority-run bank, sought federal bailout money in summer 2008 in the same way as many other institutions. But the government adjusted the rules and broke from its usual practices to issue a bailout to OneUnited, despite receiving notice that the bank was not in good financial standing.
More specifically, regulators were worried about the bank’s pay practices and its $50 million of investments in the stocks of mortgage-backing companies Freddie Mac and Fannie Mae, according to The Washington Post. When Waters, whose husband was a former OneUnited board member, learned that OneUnited might not be eligible for a bailout, she reportedly met with members of the administration of then-President George W. Bush. In the meeting, she told high-ranking Bush-administration officials that minority-run banks were in grave danger because of the financial crisis. She also went to U.S. Rep. Barney Frank (D-Mass.), the head of the House of Representatives committee in charge of the FDIC, with worries about the status of OneUnited.
Frank and the rest of the legislators ended up extending millions in taxpayer money to OneUnited, despite the fact the funds were supposed to be given to “healthy, viable” banks. The government did so by adjusting the way it calculated the bank’s assets to account for money it projected OneUnited would possess in the future instead of merely money it actually did hold in the present.
Perhaps unsurprisingly, OneUnited is one of the banks that has not been able to keep up with TARP bailout repayments.
Misuse of Minority Status?
The OneUnited issue was not a matter of race, but rather a matter of a politician using her influence to alter the behavior of the government in her favor. But the way in which Rep. Waters steered the Bush administration and her fellow lawmakers into making the decision begs the question: Were lawmakers preoccupied with appealing to minority constituents when deciding to bail OneUnited out? OneUnited and Waters did not do minority-run banks any favors in lobbying hard — and perhaps illegally — for the inclusion of OneUnited in the TARP bailouts. In fact, plenty of well-capitalized and healthy minority-run banks exist across the nation.
Minority banks in America are most commonly owned by Asian or Pacific Islander American. The proportion of Asian American run banks to those run by other minorities is larger than the share of Asian Americans in the U.S. population. Asian Americans comprise the third-largest minority group in the nation. Hispanic Americans and African Americans each own about about 15% of minority-owned banks, roughly in line with the populations’ total numbers in America. Banks run by Native Americans make up just more than 10% of the nation’s minority-owned financial institutions. While 68% of Americans define themselves as White, 98% of the nation’s banks are owned by White Americans, an example of how America’s social stratification unfortunately and often runs along ethnic and financial lines.
If you’re looking for a minority-owned bank, California, Florida and Texas would be the places to look, as the most minority banks are located in those three states, according to the FDIC.