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 … Read More ➡
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 … Read More ➡
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.
Illinois Republican Rep. Judy Biggert on Wednesday inserted into the financial regulatory reform bill an amendment calling for an investigation of efforts to rescue ShoreBank. Meanwhile the White House issued denials that it pushed for a bailout of the politically-favored community lender. The Chicago Sun-Times reported yesterday:
As Chicago’s ShoreBank struggles to survive, the Obama White House issued a strong statement Wednesday denying that it is interfering in any way with federal regulators or influencing financial institutions willing to pump money into the bank.
“White House officials have not met with ShoreBank regarding support measures for their bank, nor has the White House ‘made asks’ of financial assistance to other financial institutions for ShoreBank,” said Amy Brundage, a White House spokeswoman.
Keeping with the policy to “put nothing in writing, ever,” and the historical precedent the administration made in a non-offering of a non-job to Pennsylvania Democratic Senatorial candidate Joe … Read More ➡
According to a story over the weekend from the Chicago Tribune, the $135 million that the Obama Administration reportedly coerced from TARP recipients like Goldman Sachs and Citigroup may not be enough to save ShoreBank, the politically connected “community” lender whose big bank bailout was supposed to make it eligible for its own TARP funds. From the Tribune:
The bailout of Chicago-based ShoreBank has hit a serious snag as the Federal Reserve and Treasury drag their feet on whether to provide funding to the ailing South Side lender, sources close to the situation say….
The Treasury is deferring to the Federal Reserve. One source said some at the Fed want ShoreBank to raise more private dollars before it gets government money.
The source said the private investors are unlikely to kick in any more money. Many of the big banks received federal bailout money and have since
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