Tuesday, December 22, 2009
Central Pacific Bank misses two required dividends, will Inouye step in again?
by Larry Geller
Sen. Daniel Inouye got dinged in the press after reports that an inquiry placed by his office resulted in an unusual bailout of Central Pacific Bank. Sen. Inouye is one of the founders of CPB and an investor (see snip below).
A Washington Post story now reports that the bank has missed two required dividend payments to the US Treasury. The implication is that the bank is still in trouble, bailed out or not. In any case, Inouye’s action is back in the national spotlight.
A growing number of community banks that got federal bailouts are failing to pay quarterly dividends they owe to the government, including two banks that got aid after congressional intervention on their behalf, according to data released Monday by the Treasury Department.
Fifty-five banks failed to make dividend payments in November, a 67 percent jump over the number of delinquent banks three months earlier.
Central Pacific Financial of Hawaii got aid after an inquiry about the status of its application by the office of Sen. Daniel K. Inouye (D-Hi.), one of the bank's founders. The financially troubled company got $135 million in January. It has now missed two straight dividend payments. Unlike OneUnited [Massachusetts, see article], however, the company is required to make up those payments. [Washington Post, More bailed-out community banks failing to pay U.S. dividends,12/22/2009]
Flashback to the earlier Washington Post coverage (7/1/2009):
Sen. Daniel K. Inouye's staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm's losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn't meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye's office, Central Pacific announced that the Treasury would inject $135 million.
Even if Inouye were directly involved, it would not violate the rules the Senate sets for itself, experts said.
Both the FDIC and the Treasury said the decision was not affected by the involvement of Inouye's office.