Email Warned That Bank Up For Bailout Was ‘Disastrous’
by Marian Wang and Paul Kiel
ProPublica, Oct. 20, 2011, 11:51 a.m.

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“Wow… you guys are either making a big statement with this one or your ‘gatekeeper’ is incompetent,” warned the anonymous missive, sent in October 2008 to the Treasury and obtained by ProPublica through a Freedom of Information Act request. “This is one of the worst loan portfolios in the country run by one of the worst CEOs (and a lying CEO at that).”

The warning went unheeded. Treasury pushed ahead and provided United Commercial Bank with funds under a part of the Troubled Asset Relief Program that was aimed at bolstering healthy banks.

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When the anonymous tip reached the Treasury, timestamps on the email chain show that it was quickly forwarded to upper-level Treasury officials, including Neel Kashkari, who was then Assistant Treasury Secretary and in charge of TARP. (A spokesman for the investment management giant PIMCO, Kashkari’s current employer, said he was traveling and unavailable for comment.) Other Treasury officials pulled the bank’s securities filings, which disclosed that the bank’s auditor, PricewaterhouseCoopers, declined to continue on as its auditor.

The email was also forwarded to several FDIC officials with a note that said, “We were provided the following feedback on UCBH,” United Commercial Bank’s parent company. “Thought you should be aware. Let us know if you received similar feedback and how/if you are responding.” The Treasury Department funded the bank only after its primary regulator certified it was financially viable. That regulator was the FDIC.