Last week, half a dozen public interest groups, including Common Cause and the League of Women Voters, asked the House Ethics Committee when it will resume its investigation of Democratic Congresswoman Maxine Waters of Los Angeles. The case has existed for nearly two years. It’s alleged that the Congresswoman used her political clout to help a bank in which her husband owned stock.
During the financial meltdown two-and-a-half years ago, the federal government took over the mortgage lending giants Fannie Mae and Freddie Mac. That’s when officials from OneUnited Bank contacted Rep. Waters.
One executive was a friend who had hosted a political fundraiser for Waters at his home. The other was the incoming chairman of the National Bankers Association, which represents minority- and women-owned financial institutions. Congressowoman
"It was represented to me that many minority banks had over-leveraged their capital in Fannie and Freddie and the association wished to know whether or not their members’ capital was lost or if the government was responsible for protecting the capital that they had invested in preferred stock," says Waters.
OneUnited was particularly vulnerable because it stashed most of its available cash in Fannie and Freddie stock. When the government took over the failing mortgage agencies, that stock became worthless and OneUnited was in danger of going under.
Waters knew the bank well: her husband owned more than $350,000 of OneUnited stock. The LA Congresswoman says she responded as she often does: she advocated on behalf of a minority owned business. Waters picked up the phone and called then-Treasury Secretary Henry Paulson on behalf of the National Bankers Association.
"The question at this point should not be why I called Secretary Paulson, but why I had to," she says.
The parties scheduled a meeting for the very next day. Waters did not attend. But three of the four who did were from one bank: OneUnited. At that meeting, the OneUnited officials asked the Treasury to buy back $41 million of the worthless Fannie and Freddie stock. Treasury officials said they had no authority to do that.
Weeks later, Congress created what’s now known as TARP, the Troubled Asset Relief Program. OneUnited officials again contacted Waters’ office with a few suggestions for language that would benefit their bank.
At that point, Waters says she stepped back and consulted the then-head of the House Financial Services Committee, Democrat Barney Frank of Massachusetts.
"Because my husband had once served on the board of OneUnited Bank and still held investments there," she says. "I felt I should seek assistance from Chairman Frank, a representative from the state where the bank was headquartered, and someone with a record of commitment to the health of minority owned banks."
Frank says he counseled Waters to “stay out of it.”
And here’s where the Ethics Committee says Waters violated House Rules: it contends that she failed to keep her office out of it.
Waters says she told her chief of staff Mikael Moore that Congressman Frank told her “don’t worry about it.” Moore says he interpreted that to mean he didn’t need to work on the OneUnited banking matter that day.
The Ethics Committee’s Statement of Alleged Violations reads: "Respondent’s chief of staff provided continued assistance to OneUnited in their efforts to obtain legislation that ultimately resulted in OneUnited receiving funding from Treasury.”
Mikael Moore put it this way: "So they say I did something which directly resulted in a benefit to OneUnited and therefore a benefit to Congresswoman Waters."
Mikael Moore, who is also the Congresswoman’s grandson, told ethics investigators that he wasn’t aware of his boss’ financial interest in OneUnited Bank, so he continued to email back and forth with its officials. Language was inserted in the final legislation and OneUnited got $12 million in TARP money. The bank has not yet paid the money back.
In a highly unusual briefing this summer, Waters spent more than an hour reviewing the evidence against her with reporters. She concluded, "neither my staff nor I engaged in any improper behavior and we did not influence anyone and we did not gain any benefit."
But the House Ethics Committee says that Waters failed to stop her chief of staff from helping OneUnited, a bank in which she held a financial interest. The committee also maintains that because she’s “responsible for the conduct” of her staff, the Congresswoman violated House rules.
The case is on hold, pending the hiring of new investigating attorneys.