Political Pressure Saved ShoreBank Management
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 previous management in March. Her post closes with a quote from McKeever:
“We have complete confidence in the leadership and ability of David Vitale and his team to make Urban Partnership Bank an effective resource for growing small businesses, creating new jobs, strengthening nonprofits and renovating abandoned and neglected real estate that will help restore the economic vitality of our communities.”
Also pressing Geithner heavily before ShoreBank's seizure were four Democratic congressmen who represent Chicago-area districts: Rep. Jan Schakowsky, Rep. Jesse Jackson Jr., Rep. Danny Davis, and Rep. Bobby Rush. On Friday Schakowsky, who put forth an extraordinary effort on behalf of a bank that wasn't even in her district, expressed her relief that the ShoreBank "mission" would continue:
I congratulate Urban Partnership Bank’s Chairman, David Vitale, for continuing the legacy of ShoreBank and applying to become a Community Development Financial Institution....ShoreBank has been the iconic CDFI. It was established in 1973 in Chicago and throughout its years of service became the model for such banks around the country. I am very pleased that Urban Partnership Bank has found a way to give ShoreBank’s essential mission a second chance.
And then there are the obvious Obama Chicago ties....
As I mentioned yesterday, Ewing confirmed also -- citing Vitale -- that UPB would continue to make sure it adheres to multiple "bottom lines:"
Vitale announced that Urban Partnership Bank will apply to become a Community Development Financial Institution (CDFI), reflecting its mission to serve low and moderate income and minority communities. The new bank will also continue to support energy efficiency and environmentally-friendly development.
By the way, when I posted yesterday about these community development institutions with a "Triple Bottom Line," I had not seen the Central Illinois 9/12 Project's nicely done series on the topic, which you can read on their Web site.
Meanwhile ShoreBank Pacific, a sister to the former ShoreBank under the parent ShoreBank Corporation (which will reportedly continue to exist), will merge with OneCalifornia Bank, another community development institution. The Puget Sound Business Journal had ShoreBank Pacific on its list of troubled banks, but its top executive disputed that characterization, according to the newspaper:
ShoreBank Pacific CEO Dave Williams took issue with the bank being described as “ailing” and issued this statement: “Our capital ratio at the time of the announced merger agreement was 8.6 percent. The consent order under which we are operating required us to find additional capital to divest ShoreBank Pacific from our Chicago holding company, ShoreBank Corporation, due to the ailing condition of our Chicago-based sister bank, ShoreBank. The merger agreement with OneCalifornia Bank satisfies that requirement.”
Apparently their Chicago backers didn't want any branch of the ShoreBank enterprise to fail, as the Seattle Times reports:
"Typically when the FDIC closes one bank in a holding company, they close all the banks in the holding company," said David Williams, CEO of ShoreBank Pacific. But in this case, he said, the Pacific Northwest community bank had a suitor and could stand on its own.
OneCalifornia is backed by a nonprofit foundation that was willing to assume its risks, something the original ShoreBank was unable to extract from its investor nonprofits like the Ford Foundation and John and Catherine MacArthur Foundation -- except with a FDIC rescue.