Congressman Spencer Bachus of Alabama must feel like he’s experiencing déjà vu all over again.
The Ranking Republican on the Financial Services Committee last month asked the Obama Administration to explain its role in the bailout of Chicago-based ShoreBank, a lending institution favored by the community organizing and green job creating crowds. Hundreds of similar-sized others were allowed to fail, but several “too big to fail” banks (who survived thanks to TARP money) were reportedly pressured into a joint effort  to rescue ShoreBank. Bachus sent the president a letter , then issued a press release :
Bachus and Oversight and Investigations Subcommittee Ranking Member Judy Biggert demanded to know who in the Administration was involved in orchestrating capital contributions totaling approximately $150 million by some of the nation’s largest banks, including Goldman Sachs and Citigroup (also GE Capital, JP Morgan, and others), so that ShoreBank could qualify for $75 million in TARP funding.
“When you have the Obama Administration picking winners and losers, their political friends get bailed out while taxpayers and those less politically connected get the short end of the stick,” Bachus said.
In addition to requesting responses as to who in the Administration was involved, Bachus and Biggert called on the White House to release all records of communication—including emails, phone logs and meeting records—related to the ShoreBank negotiations that exist between the Administration and representatives of ShoreBank, and executives of the banks involved in the bailout….
“There is no way a bank without ShoreBank’s political connections would receive this kind of attention, and these actions fully make the case as to why the government should refrain from subjective, ad-hoc bailout practices,” Bachus continued.
The Central Illinois 9/12 Project  has outlined extensively  those connections and highlighted ShoreBank employees’ political donations to Obama, as well as his promotion  (as a U.S. Senator) of the bank’s microlending efforts  in far away places such as Kenya. But the political nurturing and blossoming of the little community bank with a big heart goes back to the Clinton Administration – when Bachus first became intimately familiar with them.
In 1997 the Republicans held the House majority, and Bachus chaired the Oversight and Investigations Subcommittee under the Banking and Financial Services Committee. Less than three years earlier Congress had created the Community Development Financial Institutions Fund, “to promote economic revitalization and community development through investment in and assistance to community development financial institutions, including enhancing the liquidity of community development financial institutions.” Already the fund, being managed by the Treasury Department, was allegedly being used as a tool to channel money to politically-favored institutions – namely, those favored by President  and Hillary Clinton. 
By the mid-1990s it was multi-tentacled ShoreBank (then called South Shore Bank) that was the apple of the Clintons’ eyes. A board member, Jan Piercy, was a college roommate of Mrs. Clinton and reportedly introduced her to the microlending work that ShoreBank practiced. The bank’s founders worked closely with the Clintons to help establish other similar community development institutions, as U.S. News & World Report explained in 2007 :
The bank even inspired then Gov. Bill Clinton, who launched the similar Southern Development Bancorporation in Arkansas in 1988. As president, Clinton established the Community Development Financial Institutions Fund, which supports more than 50 community development banks and funds. "All these investments," Clinton told U.S. News, "were inspired by the ShoreBank model…."
During Clinton’s 1992 presidential campaign he had pledged $1 billion over five years to fund 100 new community development banks, according to the committee report.
It was CDFI’s grantmaking practices to ShoreBank and its affiliates that drew Bachus’s attention in the mid-90s. In July 1996 CDFI Fund director Kirsten Moy  and deputy director Steve Rohde  granted $37.2 million in their first round of awards to 31 institutions, chosen from 268 applicants. According to a preliminary report from Bachus’s subcommittee, his investigation was launched “as a result of complaints about the selection process.”
The main complaint was, “why is Shorebank getting so much of this money?” Affiliates of the community lender, called “Clinton’s Favorite Bank” in a 1993 journal of the American Bankers Association, was granted $11 million during that first round. The problem, as discovered by staffers for Bachus’s committee, was that Moy and Rohde awarded funds without employing any kind of scoring system or paper trail to evaluate ShoreBank’s requests for funds – unlike other applicants.
The committee also discovered:
The CDFI Fund statute and regulations limit grants to any one awardee and its “affiliates” to $5 million over a three year period. Shorebank was awarded $4.5 million by the CDFI Fund in the first round. Subcommittee staff’s preliminary review of the files indicated that three other institutions with strong ties to Shorebank received an additional $5.75 million in first round equity and grants. The files indicated that a subsidiary of Shorebank prepared the applications for two of these institutions, and represented them in dealings with the Fund concerning their funding requests. An additional $489,500 in technical assistance was earmarked by the Fund for this subsidiary. Correspondence from the Shorebank subsidiary indicated that Shorebank itself referred to a “Shorebank system” that included two of these three institutions.
The other members of the “system” were identified as Southern Development Bancorp., Douglass Bancorp, Inc., and Louisville Development Bancorp. In an attempt to cover their tracks, Moy directed Rohde to write undated “evaluation memos” that explained why the ShoreBank “system” was successful in winning CDFI funds. An internal Treasury Department investigation, combined with the scrutiny applied by Bachus, led to the resignations of Moy and Rohde  in August 1997.
Now the Alabama Republican is wondering how the administration of another Democrat president is working behind the scenes  to keep ShoreBank afloat. This time, a lot more taxpayer money is in question.
Paul Chesser is an NLPC Associate Fellow.