Rep. Ed Perlmutter of Colorado inserted a provision into the recently passed House climate change bill that would drum up business for “green” banks, such as the one he has invested in and his family and a political donor helped found in San Francisco.
The bill calls on bank regulators to promote green banking and says federal dollars should be used to support energy-efficient home improvements at government-funded housing projects.
Mr. Perlmutter, a two-term Democrat, has two investments in the 3-year-old New Resource Bank, which calls itself the nation’s first green bank. Among other environmentally conscious banking products, the bank offers home equity loans for consumers to make their homes more energy efficient, in addition to construction loans for green builders.
A Perlmutter spokeswoman stressed that the bill provisions benefit any bank that offers qualifying products.
“Any bank can use this or take advantage of this, period. So it’s equal opportunity,” Leslie Oliver said.
“New Resource Bank was not even on the radar screen” when the congressman first introduced his ideas in a bill called the Green Resources for Energy Efficient Neighborhoods (GREEN) Act last session, she said, adding that four hearings have been held on the bill, which passed the House last year.
New Resource also lists Deana Perlmutter, the congressman’s former spouse, and his father, Leonard Perlmutter, among those who have invested “seed capital and effort” to get the venture off the ground, according to the bank’s Web site.
Mr. Perlmutter’s sponsorship of the GREEN Act given his financial stake in the bank raises ethical questions.
Elliot S. Berke, a lawyer specializing in government ethics, said lawmakers should be cognizant when it comes to even the mere appearance of an ethical problem.
“Members of Congress always need to be aware of how a personal financial interest and an official action may intersect and whether or not it creates even the appearance of impropriety or a conflict of interest under the House Ethics Rules,” Mr. Berke said.
According to the House Ethics Manual’s guidance on outside employment and income: “Although the term ‘conflict of interest’ may be subject to various interpretations in general usage, under federal law and regulation, this term ‘is limited in meaning; it denotes a situation in which an official’s conduct of his office conflicts with his private economic affairs.’ The ultimate concern ‘is risk of impairment of impartial judgment, a risk which arrises whenever there is a temptation to serve personal interests.’ ”
Mr. Perlmutter’s GREEN Act was part of a 300-page amendment added at the last minute to the Waxman-Markey energy bill, which the House passed June 26 by a narrow 219-212 vote.
According to financial disclosure forms, Mr. Perlmutter holds shares in New Resource Bank valued between $15,001 and $50,000 through a trust for his children. His stake in a separate investment partnership totals between $1,001 and $15,000.
Ms. Perlmutter, an environmental lobbyist who divorced Mr. Perlmutter in 2008, said she helped found the bank but did not invest any money into the venture.
“In my case, I provided effort [on green and sustainability principles],” she wrote in an e-mail.
Mr. Perlmutter’s 2008 financial disclosure form lists Ms. Perlmutter as having received an unspecified salary from New Resource. She said she was compensated for being a founder and for finding investors.
The lawmakers father confirmed that he is an investor but said he has not had any conversations with his son about the GREEN Act.
In addition to having family ties with New Resource, the congressman has received more than $6,000 in political contributions throughout the 2006 and 2008 election cycles from Daniel Yohannes, a seed investor and former board chairman, records show.
Repeated efforts to reach Mr. Yohannes were unsuccessful.
Peter Liu, founder of New Resource and vice chairman of its board, declined to disclose information about the size of the investments, citing “privacy and regulatory issues.”
“However, Leonard, Deana and Daniel are not significant shareholders warranting regulatory disclosure,” he said, adding that the bank “has not had any conversation with the congressman or his staff about the green banking center proposals.”
New Resource - which had $166 million in assets as of March - was the recent target of disciplinary action by the Federal Deposit Insurance Corp., which issued a cease-and-desist order in May instructing the bank to bolster its lending standards and reduce its bad debt. Mr. Liu credited the action to a slew of poorly performing construction loans.
“Back at the end of last year when the regulators were having their examination, in California the real estate market was definitely having a lot of problems,” he said, noting that the bank nevertheless has “a very solid capital base.”
The language Mr. Perlmutter inserted into the House bill instructs the secretary of Housing and Urban Development to “develop and implement a pilot program … to facilitate the financing of cost-effective capital improvements for covered assisted housing projects to improve the energy efficiency and conservation of such projects” through a “privately financed loan.”
Elsewhere, the bill says banking regulators “shall prescribe guidelines encouraging the establishment and maintenance of ‘green banking’ centers by insured depository institutions” and those centers will provide consumers with information on obtaining a home energy rating or getting financing for energy-saving improvements.
Another section seeks to minimize the upfront costs of renewable energy systems for homeowners by insuring loans for energy-efficient home improvements from green banks.
The Senate is not expected to take up energy and climate change legislation until this fall.