This is just a warm-up to a lot of posts to come. I won’t wast much of my time or yours on it but we might as well start getting in shape to track the sleaziness that’s sure to accompany one of the largest expenditures of government money in peace time. Tonight’s update concerns some news on the allocation of the TARP assistance.

Barney Frank and his rather suspect actions in directing TARP money to one of his constituent banks is the focus tonight. Now to be fair, Barney is not the only sinner but I’m going to pick on him frankly because I enjoy picking on him.

So to the point. It seems that the our man from Massachusetts may have gone a bit over the line in helping out one of the banks in his district. Here are the details from the WSJ.

The bank that Rep. Frank of Massachusetts went to bat for, OneUnited, saw its capital level sink in early September after the U.S. took control of the overextended mortgage giants Fannie Maeand Freddie Mac. OneUnited, a closely held Boston-based lender with offices in Florida and California too, held large amounts of Fannie Mae preferred shares. Their value plunged after the U.S. put Fannie and Freddie into a federal conservatorship, acquired preferred shares in them and took warrants entitling the government to nearly 80% of their common stock.

The moves left OneUnited’s capital badly depleted. A measure called “Tier 1 risk-based capital” equaled only 1.88% of assets at the bank, versus a desired level of about 6%. A OneUnited lawyer, Robert Cooper, says he called Rep. Frank and Rep. Maxine Waters of California, both Democrats, to complain that the Treasury’s move had hurt the bank.

Rep. Waters heads the House Financial Services subcommittee on housing, and until last spring her husband, Sidney Williams, was a OneUnited director. Rep. Frank, besides heading the Financial Services Committee, has longstanding ties to OneUnited, and recalls having had a deposit account at a predecessor bank in the 1960s.

Later that month, Rep. Frank was intimately involved in crafting the legislation that created the $700 billion financial-system rescue plan. Mr. Frank says that in order to protect OneUnited bank, he inserted into the bill a provision to give special consideration to banks that had less than $1 billion of assets, had been well-capitalized as of June 30, served low- and moderate-income areas, and had taken a capital hit in the federal seizure of Fannie Mae and Freddie Mac.

“I did feel that it was important to frankly try and save them since it was federal action that put them into the dumper,” Mr. Frank says.

So got that so far? We have a bank that is probably insolvent by any reasonable criteria and arguably not “systemically” important getting a piece of the pie. But this gets a lot better.

On Oct. 27, the FDIC and Massachusetts bank regulatory officials, alleging poor lending practices and executive-compensation abuses by OneUnited, slapped it with a strong enforcement action, a cease-and-desist order. Among other things, the officials told the bank to get rid of a 2008 Porsche for executives.

Mr. Cooper, the bank’s attorney, dismisses the order as a “hastily cobbled together” action. “What we are talking about is a hiccup, a blip on the screen of an otherwise-stellar enterprise,” he says. Asked whether the bank had sold the Porsche, he said only that it was complying with the order.

Mr. Frank — who has played a leading role in both the initial design of TARP and current planning to revamp it — says he spoke with a federal regulator and asked that OneUnited be given consideration for TARP money, “without in any way impinging on their general safety and soundness rules.” Mr. Frank said he didn’t remember which federal regulator he spoke with.

On Dec. 19, OneUnited received $12 million from the Treasury, on condition it raise $20 million from its shareholders, which it did.

Ms. McLaughlin, the spokeswoman for the Bush administration Treasury, said that OneUnited’s application was subject to the same review process as other banks faced.

Mr. Frank said he didn’t try to interfere with the regulatory process. “We have never told the regulators that they should ease up on them or not order them to do this or that,” he said.

He cites the bank’s status as the state’s only financial institution owned by African-Americans. “We did say, yes, I thought it would have been a social tragedy if the one minority bank in Massachusetts that has been working so hard and had been overextended into housing was to be wiped out by a federal action, the Fannie-Freddie preferred [shares] thing, and that’s why I think it was important to try to help them.”

Rep. Waters said she was unaware that the bank received money. OneUnited was “just a small” bank, she said.

Is all of this starting to come together for you. According to Congressman Frank, one of the criteria for allocating TARP money is evidently, “social tradegy” and Congresswoman Waters airly dismissing the whole thing as, “just a small bank” as if she had no other connection to it.

One of the more interesting items not contained in the excerpts from the Journal article was the fact that this bank has branches in California and Florida. I have no idea why though I would speculate that the Porsche loving owners might have needed a warm weather retreat from the rigors of New England winters.

I wanted some more information on this bank, particularly financial. I didn’t get far on their website as the quarterly earnings reports found there mysteriously stop at the end of 2007. Here is the link if you want to check it out. I rather suspect that the numbers are ugly. In fact, a quick glance through the earnings statements that are published seemed to show a banking institution disintegrating before the implosion of the past year.

Ms. Waters and Mr. Frank along with their colleagues might well want to stop by Senator John McCaines office and chat about the wages of over representing your home town financial institutions. I believe that he is the only member of the “Keating Five” still serving. There is a lot to be learned from old war stories.