Insider's Game

It’s not hard to figure out why the allegations against Maxine Waters seem bogus. You simply need to read the 80-page House Ethics Report carefully. In order to concoct a case against her, the authors of the report twisted the meaning of the House Ethics rules and embellished the underlying facts. The report was first published one year ago, but is now being released shortly before the 2010 campaign season. The timing alone makes you wonder.

The specific charge is easy to understand: “Maxine Waters requested a meeting.” That’s it. That’s all of it. No charge that Waters ever interfered with the execution of anyone’s legal duties, or that she applied undue pressure on anyone, or that she engaged in any inappropriate financial transactions. Only that she requested a meeting. At worst, she wasted people’s time. The meeting, with officials at the Department of Treasury, got no results.

According to the report, Waters violated House Rule 23, Clause 3 because she received some nonexistent “compensation” that accrued from the meeting that went nowhere. The rule states:

A Member, Delegate, Resident Commissioner, officer, or employee of the House may not receive compensation and may not permit compensation to accrue to his beneficial interest from any source, the receipt of which would occur by virtue of influence improperly exerted from his position in Congress.

A meeting is not compensation. It’s a courtesy. If the meeting did not result in financial gain to Waters, then the rule does not apply. Similarly, neither a request for a meeting, nor an expression of a particular policy concern, is an “improper exertion of influence,” which involves some kind of interference with the performance of a government official’s duties. The authors of the report twist the meaning of the words in order to fabricate a case out of thin air.

On September 8, 2008, Waters asked that Treasury officials meet with representatives of the National Bankers Association, an 80-year-old organization of minority-owned banks. The NBA was concerned about the fallout of Treasury’s decision to put Fannie Mae and Freddie Mac into conservatorship. On September 9, Robert Cooper, chairman-elect of the NBA, expressed those concerns at a meeting attended by 20 people, primarily staffers for Treasury and “various bank regulatory agencies.” The meeting lasted 45 minutes to an hour, and about half of the time was used by Treasury Department officials to explain why the government took the actions it did with regard to Fannie and Freddie. According to Cooper, “The meeting took the form of a dialogue with everyone speaking.”

Cooper was also Senior Counsel for OneUnited, a minority-owned bank headquartered in Boston. He brought along two others from OneUnited, which was used “as an exemplar of the impact the Treasury Department’s decisions would have on minority-owned banks.” Waters was not at the gathering. The authors of the report allege that “the discussion at the meeting centered on a single bank — OneUnited,” though they offer zero evidence, from any of the 20 attendees, to contradict the claim that OneUnited was referenced for illustrative purposes, as part of a generalized policy request. OneUnited also has five branches in the greater Los Angeles area, not far from Waters’ district.

Five months earlier, Waters’ husband had resigned from OneUnited’s board, though he still held shares of OneUnited. Had Treasury adopted the NBA proposal, many of its member banks would have benefited, including OneUnited. The authors of the report go to great pains to insinuate that the NBA proposal would have benefited OneUnited exclusively.

In fact, Waters declined to help out OneUnited when it sought out government assistance that was above and beyond that afforded other banks. A few weeks after the meeting, she sought the advice of a colleague because she wanted to help the firm but felt conflicted. The colleague told her to “stay out of it,” and she did.

The report’s authors falsely claim that:

The rules and precedent cited above clearly enunciate a standard that restricts Members from advocating for a matter in which they have a personal financial interest. Therefore, if Representative Waters advocated for OneUnited while her husband maintained a significant investment in the bank, then she may have violated House Rule 23 and House standards regarding conflicts of interest.

That’s not correct. The standard regarding advocacy and financial conflicts of interest is not clearly enunciated at all. The standard for voting on legislation, which is very clear cut, makes a strong distinction between laws that benefit a general class of people versus a law directed at a single business in which a member may have a financial interest. So long as the matter pertains to a general class, as opposed to a specific business, members are free to vote as they choose:

Since legislation considered by Congress affects such a broad spectrum of business and economic endeavors, a Member of the House may be confronted with the possibility of voting on legislation that would have an impact upon a personal economic interest. This may arise, for example, where a bill authorizes appropriations for a project for which the contractor is a corporation in which the Member is a shareholder, or where a Member holds a kind of municipal security for which a bill would provide federal guarantees.Longstanding House precedents have not found such interests to warrant abstention under the above-quoted House Rule that instructs Members to vote on each question presented unless they have ― a direct personal or pecuniary interest in the event of such question. Rather, it has generally been found that ― where legislation affected a class as distinct from individuals, a Member might vote.

As shown by more recent applications of the rule, however, even where one corporation or entity is primarily affected by legislation, a Member’s interest in such corporation or entity might not be found to be a disqualifying interest in the subject matter.”

When the actions extend beyond voting on legislation, to advocacy, there is no express standard, only a vague requirement for “added circumspection.”

The provisions of House Rule 3, clause 1, as discussed in this section, apply only to Member voting on the House floor. They do not apply to other actions that Members may normally take on particular matters in connection with their official duties, such as sponsoring legislation, advocating or participating in an action by a House committee, or contacting an executive branch agency. Such actions entail a degree of advocacy above and beyond that involved in voting, and thus a Member’s decision on whether to take any such action on a matter that may affect his or her personal financial interests requires added circumspection. Moreover, such actions may implicate the rules and standards, discussed above, that prohibit the use of one’s official position for personal gain. Whenever a Member is considering taking any such action on a matter that may affect his or her personal financial interests, the Member should first contact the Standards Committee for guidance.

True, Waters did contact the Treasury Department without first clearing it with the Standards Committee. Except the request was made on September 8, 2008, when things were evolving so rapidly at Fannie and Freddie that it would have been imprudent for her to wait for the Committee’s guidance. (After all, they waited a year to release this completed report.)

Again, the report illustrates how you can fabricate an ethics charge out of next to nothing.