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Bank got bailout after senator's staff called FDIC

Sen. Daniel Inouye (D-Hawaii) founded Central Pacific Financial and had most of his wealth in its stock. He says an aide did call but denies trying to sway the outcome.

July 01, 2009|Paul Kiel and Binyamin Appelbaum | Kiel writes for ProPublica, a nonprofit news organization. Appelbaum writes for the Washington Post.

WASHINGTON — U.S. Sen. Daniel Inouye's staff contacted federal regulators this fall to ask about the bailout application of an ailing Hawaii bank in which he held stock accounting for 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., had decided that it didn't meet the criteria to be recommended for an infusion 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 said it would get $135 million from the Treasury.

Inouye (D-Hawaii) acknowledged in a statement that an aide had called the FDIC to ask about Central Pacific's application. Inouye said he was not attempting to influence the outcome. The statement did not say whether Inouye directed the aide to make the call or knew at the time that it had been made.

Even if Inouye was directly involved, there was no violation of Senate rules, experts said.

The FDIC and the Treasury said the decision was not affected by the involvement of Inouye's office.

Inouye reported owning Central Pacific shares worth $350,000 to $700,000, some held by his wife, at the end of 2007. The shares represented at least two-thirds of Inouye's total reported assets. Since the end of 2007, the stock has lost 79% of its value.

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