Webster Bank in Waterbury, Conn., has found itself entangled in the battle between the two candidates seeking to replace outgoing Connecticut Sen. Joseph Lieberman.
The campaign for Linda McMahon, the Republican candidate and the former chief executive of World Wrestling Entertainment, has called for an ethics investigation into whether Webster gave her opponent, Rep. Chris Murphy (D-Conn.), a favorable interest rate on a home equity line of credit four years ago because he was a sitting a member of Congress.
McMahon, the wife of wrestling legend Vince McMahon, also claims that Webster Chairman and Chief Executive James Smith asked Murphy to use his influence to help the bank tap the Troubled Asset Relief Program during the height of the financial crisis.
Webster forcefully denied the allegations, arguing in a press release Friday that "Murphy's service in Congress and on the House Financial Services Committee had no effect on Murphy's banking relationship with Webster." Webster, a unit of the $19.4 billion-asset Webster Financial (WFS), is the second-largest bank based in Connecticut.
Murphy, a three-term Congressman, and McMahon are in a tight race to replace Lieberman, with polls showing Murphy nursing a slight lead. McMahon also ran for Senate in 2010 but lost out to former Attorney General Richard Blumenthal in the general election.
McMahon's camp lodged the attack on Murphy Friday and over the weekend formally filed a complaint with the Office of Congressional Ethics to investigate whether he violated House rules when the accepted the loan. Murphy "has accepted a prohibited gift and used his official position to secure himself personal and political financial benefit," the complaint said.
In 2008, Webster refinanced a home equity loan into a home equity line of credit for Murphy with an interest rate of 4.99%. McMahon's campaign claimed that this rate was below market rates of between 6.43% and 7.43% for similar loans at the time and was "generous" considering that Murphy had defaulted on a previous mortgage, the campaign said.
In its response, Webster said that Murphy's interest rate was above the 3.99% it was giving its most creditworthy customers at the time. The credit line was repaid when the home was sold in 2010 and Murphy has no outstanding loans with Webster, the bank said.
McMahon's campaign also questioned Murphy's relationship with Webster. The campaign said that Murphy previously worked for Webster as a private lawyer, received campaign contributions from the bank and voted to give Webster a $400 million bailout under the Troubled Asset Relief Program. It also suggested that CEO Smith chairman was the honorary finance chairman for Murphy's campaigns for two years.
Webster acknowledged that its political action committee had donated $2,100 to Murphy's congressional campaigns between 2008 and 2010 but said it had not made a donation since. It also said that Smith never held any official, permanent position on Murphy's campaigns and that Smith and Murphy did not discuss Murphy's loans or have any conversations regarding PAC contributions.
