Sen. Dianne Feinstein introduced legislation early this year to channel $25 billion in taxpayer funds to a federal agency that had just awarded her husband’s firm a lucrative contract to sell foreclosed properties.
The California senator sought the additional funds for the Federal Deposit Insurance Corp. to boost the agency’s efforts to avert home foreclosures - a huge issue in her home state.
But as the Washington Times first reported Tuesday, Feinstein’s intervention came around the same time the FDIC was awarding a multimillion-dollar contract to CB Richard Ellis Group (CBRE) - the commercial real-estate firm chaired by her husband, Richard Blum.
Under the FDIC’s three-year contract with CBRE, the world’s largest commercial real-estate services company, the firm will sell foreclosed properties which the agency inherited from failed banks.
Feinstein began pushing for additional funding for the FDIC beginning last fall, introducing a bill Jan. 6, seeking the $25 billion from the government’s Troubled Asset Relief Program, which she said would help the agency avert an estimated 1.5 million foreclosures.
The proposal was backed by FDIC Chairman Sheila C. Bair, who was seeking to expand a program the agency had successfully used to reduce foreclosures among borrowers of the failed IndyMac bank by expediting loan workouts and expanding federal loan guarantees.
Spokesmen for Feinstein and Blum’s firm told The Times that there was no connection between the legislation and the contract to Blum’s firm, which was awarded Nov. 13. Feinstein’s office said the senator was unaware her husband’s firm had received an FDIC contract until the Times inquired about it Jan. 21.
Blum, who is a nonexecutive chairman of the real-estate firm, said he was unaware of CBRE’s application until after the award was publicly announced Nov. 26. A spokesman for Feinstein said he does not participate in the firm’s day-to-day activities and he has no operational role.
Besides its indirect ties to Feinstein, CBRE’s directors include several Washington powerbrokers, including former Sen. Tom Daschle, former Clinton Commerce Secretary Micky Cantor, and prominent GOP fund-raisers Bradford M. Freeman and Fred Malek.
Even if neither Blum, nor Feinstein were aware of the firm’s bid to the FDIC several ethics experts told the Times that the contract award nonetheless gives the appearance of a conflict of interest.
It “highlights the problem of a senator with a spouse who has extensive business interests that intersect frequently with the federal government,” said Melanie Sloan, executive director of the watchdog group Citizens for Responsibility and Ethics in Washington (CREW). “Even if there is no actual conflict of interest, it often has the appearance of a conflict.”
Feinstein has run into such problems before. As a former member of the Military Construction Appropriations subcommittee, she voted for millions in appropriations that benefited her husband’s firms before deciding to step down from that post in the face of criticism about such conflicts in early 2007.
The Times said that real estate specialists also questioned the government’s generosity in the contract with CBRE.
CBRE will be paid monthly maintenance fees for each foreclosed property it handles, as well as commissions and incentives. Total compensation may range from 8 percent of the sales price on many residential properties, up to 30 percent for properties worth $25,000 or less. A smaller firm also won a slice of the work with similar terms.
Most real estate agents earn no more than 6 percent on residential, even on foreclosed properties, and CBRE doesn’t have as much experience in foreclosure sales as other firms, the experts said.
The FDIC said the above-market incentives were designed to encourage quick sales of the growing number of foreclosed properties the agency has inherited during the recession. An agency spokesman also denied that politics was involved in the awarding of the contract, noting the decision was made by career staff.