Here’s a question I asked around this time last year, and still have yet to come across a good answer to: why in blazes is OneUnited Bank still in business?

Do you remember OneUnited? Here’s a hint: it’s the country’s largest minority-owned bank, with $535 million in assets. Here’s another: it’s Maxine Waters’ favorite financial institution.  

Ah, now you recall! OneUnited was the bank Waters intervened on behalf of with regulators (apparently under false pretenses) back when the government was doling out TARP money. Strictly by the numbers, the company would only survive with the help of egregious special treatment by the government. A $50 million hole had just appeared in its balance sheet, after its portfolio of GSE preferreds collapsed when the government stopped paying dividends. So the FDIC—over the loud objections of staffers--went to extreme lengths to keep the company on life support. For instance, the agency allowed OneUnited to recognize $20 million in future tax benefits, from stock losses, as capital. (OneUnited was the only bank under the FDIC’s jurisdiction to get such an exemption.) And when the company was awarded $12 million TARP money (again, over the objections of FDIC staff), the FDIC let OneUnited count it as capital before it even received the funds. Later on, an FDIC official complained in an e-mail that the special treatment OneUnited got was “a travesty of justice”—which, of course, it was.  

(Waters neglected to mention at the time, by the way, that she had a particular interest in OneUnited not collapsing, inasmuch as her husband was a major shareholder and once sat on its board. The House Ethics Committee is looking into the matter.) 

But put aside which House rules Waters may or may not have broken. Let’s get back to my original question: why haven’t Sheila Bair and her minions, who’ve propped this zombie up for so long even as they’ve shuttered scores of other banks, finally brought the hammer down? The numbers are beyond ugly.  At the end of the first quarter, OneUnited’s Tangible Common Equity to Tangible Assets was minus-2.52%. There are only 25 banks in the country that carry a TCE ratio that’s actually negative. Worse, OneUnited’s TCE has now been in the red for eleven straight quarters. Just two other banks have gone longer. The bank’s Tier 1 Common Ratio is minus-7.43%.

Nor is its asset quality a thing of beauty. At the end of the first quarter, non-performing assets stood at 5.55%, while the bank’s loan loss reserve was just 1.0%, or only 26% of nonperforming loans. The company has missed paying its last nine consecutive TARP dividends. By any realistic accounting, OneUnited is insolvent. 

This would be a sorry enough tale if OneUnited had actually been doing some good on the lending side, by financing worthy minority borrowers that larger lenders had overlooked. Wrong. Prior to Waters’ intervention in 2009, OneUnited was perhaps best known as the being the bank that owned a 3,200-square-foot beach house in Malibu (and a Porsche SUV in Boston) for use by its CEO. That same CEO, Kevin Cohee, was arrested for cocaine possession in 2007.

And, remember, the bank’s financial troubles didn’t come about as a result of inner-city subprime loans gone bad. OneUnited simply made the mistake of owning GSE preferreds. Its problems were then compounded by the declining real estate cycle. Real estate lately accounts for 99.5% of the bank’s loan book (including  loans on properties in tony areas such as Brookline and Martha’s Vineyard). C&I accounts for just 0.4% of loans. And consumer? All of $498,000. That’s right, thousand.  So the help OneUnited has provided minority borrowers essentially rounds to zero. 

Why is this bank still in business? Since the credit crunch ended, we’ve all gotten used to hearing tough talk from banking regulators, not least Sheila Bair, about how it’s long past time that the banking industry’s worst excesses be ended once and for all. Fine. Here are some flagrant, abusive, long-lived excesses—many of which Bair and her crew have enabled. After extending so many lifelines, for so long, to such a politically favored bank, the FDIC may feel too embarrassed to step up and do what it should have done awhile ago. OneUnited has already gotten too many benefits from the taxpayer. Bair’s FDIC should finally do what it’s done to so many other banks (many of which weren’t in nearly as bad a shape as OneUnited.) Shut it down!

What do you think? Let me know!