Urban Partnership Bank, the successor to ShoreBank, late last week hastily withdrew the application it had submitted to state banking regulators to name as one of its directors Donald Beal, owner of Arrow Lumber Co., the South Side firm just barred from doing future business with the city after admitting to defrauding it.
Arrow Lumber is a customer of Urban Partnership Bank, a bank spokesman confirmed. The new lender was financed by a host of Wall Street giants like Goldman Sachs Group Inc. and formed in August to take over the
It’s been a week since the Federal Deposit Insurance Corporation swept away ShoreBank’s bad assets (cost: $367.7 million), changed its name to Urban Partnership Bank, and left it largely in the hands of the same people (and investors) who ran it before. Since then there have been several articles that called the process and new arrangement “unusual.” I guess institutions loved by two presidents call for special treatment.
Distinctions need to be made to fully understand what transpired. ShoreBank, the community development lending institution and bank with a presence in Chicago, Detroit and Cleveland, was owned by a holding company: ShoreBank Corporation. The bank failed, but not the holding company, which still oversees some community development nonprofits, an international microlending advisory company, and a bank it co-owns in the Northwest. FDIC announced the parent corporation would continue to operate, but that its “investment in ShoreBank is now worthless.”
Among other things, it looks like the Chicago lobbying to save ShoreBank paid off. Earlier this month I discovered a letter sent by Windy City power player and big Democrat donor Lester McKeever, Jr., to Treasury Secretary Timothy Geithner, which urged his intervention. “It is my hope,” McKeever wrote, “and one shared by others who care deeply about its most vulnerable communities, that the ShoreBank recapitalization plan with investment coming from the U.S. Treasury will enable it to continue servicing its customers and fulfilling its mission.”
In a post today on ShoreBank’s blog, online channel manager (whatever that is) Sarah Ewing welcomes customers to the renamed institution, Urban Partnership Bank, that survived thanks to the FDIC lopping off ShoreBank’s bad assets. Reading like a press release, Ewing explains how UPB will continue the same services that ShoreBank used to deliver, under the leadership of chairman David Vitale, who replaced …
Looks like FDIC chairman Sheila Bair succeeded in her pursuit to save her baby. The Wall Street firms she reportedly pressured to help save ShoreBank – Goldman Sachs, Bank of America, JP Morgan Chase, Morgan Stanley, and General Electric, among others – are all investors in the new ShoreBank, which will now be called Urban Partnership Bank. Roughly the same amount of capital — $140 million – that had been raised from those financial institutions for the purposes of winning TARP funds will instead back the new venture.…
Charlie Gasparino of Fox Business Network reported yesterday that the Obama Administration, Federal Reserve and Wall Street firms (like Goldman Sachs, Citigroup, etc.) are exploring a “face-saving” measure by splitting the presidentially beloved ShoreBank Corporation in two, with the community/green jobs lender surviving with the “good” assets while the FDIC and private investors absorb the toxic assets. Another reporter following the story told me that ShoreBank’s Friday deadline from the investors has been extended but he didn’t know how long. A spokeswoman from Goldman Sachs refused to comment on the issue.
Here’s the split-the-baby scenario explained by Gasparino:
This is asinine: as was reported last week by Bloomberg , ShoreBank’s Tier 1 capital has fallen from $43.5 million in December 2009 to $4.1 million at the end of June. It is almost entirely worthless and is only being saved – while other …
Probably not. Seems like the more that presidentially-prizedShoreBank gets extensions from private financial institutions (Goldman Sachs, Citigroup, etc.) and from its federal regulators (the FDIC and Federal Reserve), the deeper in the hole it finds itself. Earlier this week the Chicago Tribunereported:
ShoreBank’s capital deficiency worsened in the second quarter, according to newly submitted financial results to regulators, and the Chicago-based lender now needs to raise at least $190 million just to meet targets set out in March by state and U.S. banking regulators….
The South Side bank has arranged a capital infusion of about $150 million fromWall Street investment firms,big banks, insurance companies and philanthropic groups. It’s hoping that private investment will then make it eligible for about $75 million in bailout funds from the U.S. Treasury Department.
Concerns have been raised about whether $225 million will be enough to save
The deadline for ShoreBank to come up with sufficient outside capital has been extended again, with the Federal Reserve saying more than $150 million from the likes of Goldman Sachs and Citigroup and $75 million in TARP money aren’t enough to save the politically-connected community lender. Crain’s Chicago Business reports it’s the third extension the Wall Street firms have granted to enable ShoreBank to get its act together, with the new deadline August 6.
While the Obama administration has denied pressuring big lenders to bail out ShoreBank, these extensions (while other community lenders have been allowed to fail) only serve as further evidence that powerful political forces are at work on their behalf. Charlie Gasparino of Fox Business Network has reported that the Federal Deposit Insurance Corporation was a big player in convincing the Wall Street finance companies – all who received government bailout funds themselves – to ante …
I was interviewed by David Asman on the Fox Business Network on Wednesday, July 21. The topic is the racial mandates contained in the Dodd-Frank financial services regulatory overhaul. Here’s a transcript:
David Asman: The financial regulation Bill is now law and while we know that the twenty three hundred page document is full of new bureaucracies and regulations you may not know there is actually language in this law that requires racial profiling. Peter Flaherty is President of National Legal and Policy Center an ethics watchdog based in Washington. He has done some digging into this Bill. Peter, you know, I couldn’t believe it when I first heard it – I mean this is an Administration that prides themselves on being anti-racial. They are against racial profiling that doesn’t exist, for example in the Arizona immigration law. Get this: lenders will – these new data collection system that …
For example, ShoreBank has two sub-entities based in the Pacific Northwest: the FDIC-backed ShoreBank Pacific, and the nonprofit ShoreBank Enterprise Cascadia. Both are institutions whose lending criteria are based upon progressively defined notions of “sustainability,” with the bank a partnership between ShoreBank Corp. and the environmental group Ecotrust. The bank’s mission is to “profitably assist businesses, and through them their communities, to be sustainable in economic, social, and environmental practices.” Here’s how they explain their lending criteria:
…Unlike other banks, we are conscientious to whom we lend, and
Last week the Chicago Tribunereported that Illinois Finance Authority chairman Bill Brandt threatened “a firestorm” in the Windy City if the Federal Reserve did not follow through with a bailout of South Side-based ShoreBank. This followed some reported pressure applied by the Obama Administration on companies like Goldman Sachs, Citigroup, GE Capital, Bank of America, and Chase, who were asked to kick in $20 million each to make politically-backed community lender appear eligible to receive TARP funds.
Turns out the preference for Chicago-type coercion goes right to the top (and the origins) of the troubled bank itself.