Hawaii Dem Linked to Questionable Bank Bailout

A struggling Hawaii bank received a $135 million federal bailout last fall two weeks after staff from the office of Sen. Daniel K. Inouye, a big investor in the bank, called federal regulators about the aid application, according to a report in ProPublica Tuesday.

Bank regulators had designated Central Pacific Financial as a marginal candidate to receive federal assistance, according to documents cited in the report. But soon after the phone call from Inouye's office, the Treasury directed millions of dollars to bolster the bank's capital reserves.

Inouye, D-Hawaii, owns shares in the bank that totaled between $350,000 and $700,000 at the end of 2007, according to the report. That amounts to roughly two-thirds of the senator's personal wealth.

Since 2007, the bank's stock has lost 79 percent of its value.

While it's not unique for a senator to have a stake in a local bank, it was unusual for Inouye's office to contact regulators about the bank's application, the report states.

Inouye acknowledged in a statement that an aide did contact the Federal Deposit Insurance Corporation about Central Pacific's application, but denied trying to influence any decision. He didn't mention whether the aide contacted regulators at his request.

Such involvement wouldn't violate Senate rules, the report cites experts as saying.

The FDIC and Treasury said the decision to bail out the bank was not related to the communication with Inouye's office, according to the report.

The story was worked on jointly by ProPublica and the Washington Post. It appeared in the Post Wednesday.