How the Obama administration rewarded a failed banker.
3:14 PM, Aug 12, 2011 • By DANIEL HALPER
Roberto Herencia was appointed by President Obama to sit on the board of directors of the Overseas Private Investment Corporation (OPIC) back in November 2010. OPIC is the government’s development finance institution and, according to their website, “mobilizes private capital to help solve critical world challenges and in doing so, advances U.S. foreign policy.” The Senate has not yet confirmed Herencia, but as senators consider whether to support his nomination, it’s worth keeping in mind what the press release that announced his nomination did not mention.
In May 2009, Herencia was named president and CEO of Midwest Banc Holdings, Inc. According to reports, Herencia was brought in to “save” the company. But, in just a year, Herencia managed to put the bank in an even bigger hole, and in May 2010, the community bank was among the first to receive federal bailout funds. Even so, Midwest Bank was not able to recover with a federal bailout and was eventually seized by regulators after failing to raise the capital it needed to stay independent.
With the bank in ruins, Herencia resigned from his post as CEO. (His relationship with the bank, however, continued: After resigning, Herencia signed a “consulting” agreement that would pay him a cool $25,000 a month.)
The failure of Herencia’s Midwest Bank came at great cost to the taxpayers. According to the Chicago Tribune, after the bank received $85 million from the treasury’s Troubled Asset Relief Program (TARP), it “continued to have problems” and “exercised its right to not pay dividends to the government, so its failure, unlike that of many other banks, will cost taxpayers money.”
Yet, apparently, the Obama administration believes that Herencia can help solve “critical world challenges,” even though he could not help save a failing community bank.
But it isn’t just a single bad banking experience that should concern senators who are contemplating whether to support Herencia’s nomination.
Prior to joining Midwest Bank, Herencia spent 17 years as vice president of Popular Inc. and as president of Banco Popular North America. Towards the end of his tenure as president of Banco Popular North America, the bank received $935 million in TARP funds in December 2008 due to “poor investments in the United States.” The investment from the federal government came after the bank posted an annual loss of $1.2 billion in 2008. Yet Banco Popluar’s problems continued and, nine months later, the bank had lost $361 million.
The bailout of Banco Popular was preceded by the selling of its consumer lending unit Equity One to a division of AIG in January 2008. Equity One was a subprime lending outfit for Banco Popular and, according to reports at the time, Banco Popular had a “faltering mortgage business” that was causing its profits to fall drastically.
With this kind of resume, it’s any wonder that Herencia would be nominated for a job anywhere, let alone a fine spot in the Obama administration.