Sheila Bair

Obama Mortgage Modification Bailout Distorts Housing Market

house in waterCall it a paradox. The U.S. economy officially has been out of recession for 15 months. The stock market enjoyed a record-high September; durable goods orders are up; and consumer spending is growing. Yet homeowners continue to lose their properties at a frequency not seen since the Great Depression. And this is despite - and possibly to some extent, because of - an emergency federal program in place for the past year and a half designed to stave off foreclosures. Call it instead, then, a consumer bailout. But don't expect it to end soon.

FDIC Seizes ShoreBank; Installs Management in New Bank

Shorebank logoOn Friday the Federal Deposit Insurance Corporation momentarily took over politically-connected ShoreBank, just long enough to relieve it of some of its woes and then turn it back over to the same people to continue its same failed mission. According to a press release, the FDIC Deposit Insurance Fund will take a $367.7 million hit in the transaction.

Can Chicago Lobbying Save ShoreBank?

Shorebank logoProbably not. Seems like the more that presidentially-prized ShoreBank 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 Tribune reported:

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….

Is ShoreBank Sheila Bair's Baby?

Sheila BairThe 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.

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