Ethics panel says Rep. Waters broke House rules

Congresswoman Maxine Waters (D-CA) (L) talks to a patient at the Remote Area Medical (RAM) health clinic in Inglewood, California August 11, 2009.

WASHINGTON (Reuters) - Maxine Waters on Monday became the second Democrat in the House of Representatives in two weeks to be accused of ethics violations, an embarrassing blow as the party fights to keep its majority in the November 2 elections.

The House ethics panel said it had found evidence of undisclosed ethics violations by California's Waters, who denied breaking any rules in setting up a 2008 meeting between a banker and the U.S. treasury secretary and vowed to contest the allegations in a public trial.

"I simply will not be forced to admit to something I did not do," Waters said in a prepared statement, explaining her decision not to accept the charges and force a public trial.

"The record will clearly show that in advocating on behalf of minority banks neither my office nor I benefited in any way, engaged in improper action or influenced anyone," Waters added.

The announcement came just days after the ethics panel announced 13 ethics charges against New York Representative Charles Rangel, whose trial is expected to begin in September.

The two lawmakers are under intense pressure from fellow Democrats to cut a deal to avoid the spectacle of a public trial, though that appears unlikely.

Both Rangel and Waters are members of the Congressional Black Caucus, making the cases highly sensitive as Democrats are working to get a big voter turnout by black Americans, one of their traditional constituencies.

The ethics charges were an embarrassment for Democrats, who face substantial losses in the chamber in November and whose leader, House Speaker Nancy Pelosi, had pledged to "drain the swamp" of corruption resulting from a dozen years of Republican domination that ended in 2006.

Democrats hold 255 seats in the House, 77 more than minority Republicans, but are facing a wave of anti-incumbent anger over a weak economy and sustained unemployment. Voters will vote for all 435 House seats and choose 37 of 100 senators in the mid-term congressional elections.

The ethics panel on Monday made public an August 2009 report from an outside body that recommended the investigation of Waters.

MEETING WITH BANKER

The report alleged that Waters helped a top official at minority-owned OneUnited Bank obtain a meeting with then-Treasury Secretary Henry Paulson just after the government seized mortgage finance giants Fannie Mae and Freddie Mac in September 2008.

The official, Robert Cooper, also served at the time as chairman-elect of the National Bankers Association, an industry group that represents 103 banks owned by minorities and women.

The California lawmaker's husband owned stock in the privately held OneUnited Bank and had earlier served on the board.

Waters, who heads the House Financial Services Housing and Community Opportunity Subcommittee, has said the meeting was made so the banker's group could raise its concerns and was in keeping with her long record of promoting minority-owned businesses and lending in underserved communities.

Like many minority-owned banks, OneUnited had heavily invested in Fannie Mae and Freddie Mac and sustained heavy losses as a result of the government takeover of the two entities.

At the meeting, OneUnited asked the federal government to give it $50 million in compensation for government statements leading up to the crisis that Fannie Mae and Freddie Mac were healthy.

OneUnited never got the $50 million. The bank later got $12 million in funds from the $700 billion bank rescue program, which had not yet been proposed at the time of the Sept 9, 2008, meeting.

Waters did not attend the meeting and the outside body does not allege that Waters helped the bank get the bailout funds.

The outside body, created earlier in 2008 as part of Pelosi's pledge clean up ethics issues in the chamber, can make recommendations but has no authority to take action.

(Editing by Doina Chiacu and Cynthia Osterman)