Specter's 'reluctant' vote helped firm with ties to his wife

| Thursday, Feb. 26, 2009

On Oct. 1, after a critical vote on a $700 billion financial industry bailout package, Sen. Arlen Specter issued a two-paragraph statement explaining why he "reluctantly" voted, along with 73 colleagues, for the measure.

Before the year was over, a Delaware-based bank holding company that counts the senator's wife as a nearly decade-long director got a $45.2 million infusion from the bill.

The financial firm was Bancorp Inc., with operations in Delaware and Pennsylvania. Joan Specter has been a director of the firm or its predecessors since 1999, according to company filings with the Securities and Exchange Commission.

Asked Tuesday for comment, Specter spokeswoman Kate Kelly issued a brief statement denying that the senator had any role in securing money for the financial institution.

"Arlen Specter did not lobby TARP (the Treasury Department) or anyone else on behalf of Bancorp. The Treasury Department made the awards based on its own criteria," she wrote in an e-mail.

She noted that Specter, a Republican, later voted against releasing an additional $350 billion to Treasury "because of the program's ineffectiveness and lack of oversight/transparency."

Kelly said Bancorp did not contact or lobby Specter.

A Bancorp recent filing with the SEC shows that Joan Specter, a former Philadelphia City Council member, was paid $32,500 during the past year as an outside director. She holds options on 5,374 shares of stock in Bancorp, a company that reported assets of $1.83 billion as of Dec. 31. The filing says she has been a member of the bank's compensation and nomination and governance committees.

She could not be reached for comment.

In his Oct. 1 statement, Specter said he voted for the measure, but reluctantly, "because of the severe risk that there might be a very enormous economic downturn, which could have very serious effects."

"I know that it is politically unpopular because of the failure of regulators. Sometimes — even though it is politically unpopular — you just have to bite the bullet and do what is necessary for the future of the economy."

Later that month, in appearances at a town hall meeting and other events, the senior Pennsylvania senator acknowledged he sensed anger from his constituents, who were "madder than hell" that the financial community was getting a bailout after taking enormous risks.

"People in Pennsylvania are at the boiling point," he told reporters in Lancaster not long after the vote.

Financial disclosure statements filed by Specter list his wife's involvement with Bancorp in some but not all years since 1999 when, according to SEC filimgs, she joined the bank. For example, Bancorp is not listed on his disclosure statements for 2003 or 2002, but is disclosed for 2001 and 2004.

According to an SEC filing, Bancorp entered into a letter of agreement Dec. 12 with the Treasury under the provisions of the Emergency Economic Stabilization Act of 2008. Under that agreement, the bank sold 45,220 shares of its stock to the Treasury for a cash infusion of $45.22 million.

Because of restrictions imposed by the bailout plan, Bancorp was required to amend its employment agreement with its chief executive, Betsy Z. Cohen, records show. Among other changes, the amended agreement reduces Cohen's severance and retirement benefits.

Prior to the formation of Bancorp, which describes itself as a branchless Internet bank, Cohen and Joan Specter were affilated with JeffBank or Jefferson Bank.

Campaign finance reports show Cohen and other bank executives donated $6,250 to Specter's campaign committee.

The Treasury Web site lists hundreds of financial institutions across the country that participated in the capital infusion program. The $700 billion package included a separate program under which the government was authorized to purchase so-called troubled assets.

In a story published this week, USA Today reported that a few other members of Congress or their spouses, including Sen. Daniel Inouye, a Hawaii Democrat, owned stock in or were employed by companies that benefited from the bill.

In its latest financial report, Bancorp reported net losses of $877,000 to common shareholders for the quarter ending Dec. 31. Cohen blamed the "weakening economy and illiquidity in the market for certain securities" for a net charge of $1.9 million after taxes to the bank's securities portfolio in that quarter.

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