Untold Tales of the West
by Greg Wongham
There’s a story unfolding throughout the western part of America (Utah,
Nevada, California, Nevada, Washington, Oregon, and Idaho) that is not being
told and unlike the great sagas of pioneering men and women that founded of
the country, this story of the West is being hushed up and here's the reason
why.
This story is about the banking company, Bank of the West, and the bank
holding company that controls it, BancWest. BancWest was created when Hawaii’s
second largest bank, 1st Hawaiian Bank merged with Bank of the
West, which is controlled by the French banking firm BanqueWest. This
consolidation of capital between European, Hawaii and the California based
Bank of the West has created the 2nd largest bank in Utah. They will have 118
branches in Northern and Central California, 30 branches in Oregon, 9 branches
in Washington, 68 branches in Utah and Idaho and 23 branches in New Mexico and
7 in Las Vegas, Nevada.
The public should be concerned about these mega changes in the banking
system because of the similarities they bare to the changes in the banking
system that caused the failure of the thrift banks throughout the country in
the ‘80s. The failure of the thrifts amounted to $ 328 billion of losses and
in 1989, the closing of the Federal Savings and Loan Insurance Company
(FSLIC). If the Federal Deposit Insurance Company (FDIC) falls victim to the
myriad of unforeseen banking problems that arose in the ‘80s, then a crisis
exist that threatens the principles of the FDIC and exposes the ordinary
citizen to financial ruin.
The politically connected role of 1st Hawaiian Bank is integrally linked to
Washington and Wall Street. It existed during the tenure of former Secretary
of the Treasury, William Simon, who served during the Reagan Administration
(1970-1979), and through the tenure of former Secretary of the Treasury Robert
Rubin, who served during the Clinton Administration (1993-1999), until he
resigned in May of 1999. 1st Hawaiian’s CEO, Walter Dodds and former
Governor John Waihee, as well as, Hawaii’s present Governor Ben Cayetano
were listed as guest who were slept overnight and met with President Clinton
at the White house. The mere fact that these people are acquainted is no
crime, so, what's the problem?
The problems are based on loan losses that may have been carried on the
books of 1st Hawaiian Bank since 1975, when Hawaii’s first thrift bank
failed. 1st Hawaiian took over the ailing thrift at the behest of then
(D)Governor George Ariyoshi, who was also one of the bank’s directors. From
1975 to 1983, nine of Hawaii’s 20 thrift banks, as well as, Hawaii’s
equivalent of the FSLIC, Thrift Guaranty, failed. Hawaii’s Thrift Guaranty
was established by the State legislature and contained provisions that
mandated that the monies contributed into Thrift Guaranty would come from the
20 State chartered banks.
The monies would be used to insure depositors accounts up to $10,000 per
account. In 1985, 1st Hawaiian Bank’s CEO, Walter Dodds was reported to have
come to the rescue of the State’s thrifts by loaning the State $32 million,
which would eventually be repaid by the taxpayers of Hawaii.
A run on the Hawaii banks ensued, based on the outcry from the public
surrounding rumors of insider deals and political corruption linking the
Governor and his brother James Ariyoshi. Hawaii’s Democratic Party machine
appointed Ms Donna Tanoue as the Hawaii Bank Examiner after he was made the
scapegoat for stalling and not taking action sooner. Ms. Tanoue white-washed
the situation; and, in the end; no one was held accountable and no one did
time. Reports suggested that the Governor had intervened on behalf of his good
friend and long time political supporter, developer Norman Inaba. This was
similar to the classic question that arose across the country as one thrift
after another failed, it ask, “what are the risk when a bank loans the
majority of its money to one developer?”
The loan losses that have been carried on the books of 1st Hawaiian as “goodwill”
assets came back to haunt the bank in 1998, as the bank attempted to expand
and buy-out other banks. The Federal Deposit Insurance Company (FDIC)
standards required banks to set aside cash reserves to cover both old and new
loan losses. The bank realized that this might present problems for them and
their future plans to expand. That’s when the Hawaii Democratic machine was
able to influence President Clinton to appoint Ms. Donna Tanoue to the
position of Chairman, of the FDIC. Since then, the FDIC has lessened their
standards and a record number of banks have failed. The results of which is
that the FDIC has lost money.
The greatest threat to the people of California, Utah, Nevada,
Washington, Oregon, Idaho, New Mexico, Colorado and the other western states
that the Bank of the West will call home, lies in the fact that the FDIC is
the agency that decides whether or not, one bank has the financial capacity to
buy out another bank. If Ms. Tanoue is allowed to cover-up for her politically
connected banker friends as she did before; then the public should beware of
the financial losses that may accrue if the bank’s losses rise.
Last week, the Japan Travel Bureau, warned Japanese travelers about going
to Saipan because of the rising crime including murders, and increasing drug
problems. BancWest has begun operations in Saipan. If tourism suffers because
of the social unrest, then business suffers and banks lose money. The question
that arose as the savings and loans failed was, what is the risk of banks
loaning the majority of their money to one developer? The question that the
public should ask is, what are the risk of a bank holding company that seeks
to do business in countries that are experiencing social and political
instability?
The Clinton / Gore link to the Hawaii bank scandal
Before the politically connected Hawaii banks could fulfill their plans to
expand they needed support from the 1993, Democratic Party’s Presidential
hopeful, William Jefferson Clinton. They used their connections to Asian
financial banking sources and the vast fortune of the Hawaii Democratic Party
controlled Hawaiian Trusts like a carrot to lure the cash strapped Clinton. It
resulted in Clinton’s appointment of Goldman-Sachs, co-director Robert Rubin
as Clinton’s Secretary of the Treasury. Goldman-Sachs was already involved
with Hawaii banking deals that included former Secretary Treasurer, William
Simon.
In his position as Secretary of the Treasury, Robert Rubin was successful
in changing two laws that had been part of the Code of Federal Regulations
(CFR) for more than 60-plus years. The first of the laws, the Glass-Steagall
Act was implemented after the stock market crash of 1929. Like many of the
banking and finance related laws that were passed during this time, the
Glass-Steagall Act was meant to protect the public against risk that might
jeopardize their money relative to the sales of securities. The law, forbid
banks from engaging in the securities business. The government’s newly
created securities regulatory agency, the Securities Exchange Commission (SEC)
wanted to deny any chance for banks to co-mingle the monies of depositors with
the minimum cash required to raise capital through the sale of stocks and
bonds. Don’t be surprised if one day, ads appear in your local papers
offering high-yield Chinese government bonds (for dams, bridges, highways,
airports, and weapons of mass destruction).
The second law that was changed by Rubin in 1997, was the Bank Holding
Company Act. He argued that the laws were archaic and were instituted in a
time that didn’t reflect the changes that the American banking industry
faced in today’s competitive financial world. The modifications to the Bank
Holding Company Act would allow America’s banks to broaden the definition of
banking services that would be allowed by the government’s financial
regulatory agencies.
Thus, Rubin was successful in opening the door for bank holding companies
and their affiliates to engage in stock brokerage activities like underwriting
and dealing, as well as, other diversified banking and finance related
services. The changes that were made by Rubin, and the lessening of the
standards by Ms. Tanoue, made it possible for 1st Hawaiian’s holding
company, BancWest to enhance their revenue generating potential despite the
old loan losses they absorbed to keep their political insiders out of jail
after the Hawaii thrifts failed.
One wonders how you’ll be factored into the equation, after all, its only
money . . . your money.
See also
