FDIC Seizes ShoreBank; Reinstalls Failed Management

National Legal & Policy Center ^ | August 23, 2010 | Paul Chesser

[jazusamo]

 

On 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.

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.

FDIC calls Urban Partnership Bank a “newly chartered institution,” and says this coalition was “the only bidder” for ShoreBank’s “good” assets. Big surprise, since no one in their right mind would – without pressure from the government agency that regulates them – have put this turkey on their books. But FDIC’s love and sympathy for ShoreBank showed through in the supplemental fact sheet it issued Friday about the transaction:

ShoreBank is a unique kind of institution - one that is mission-driven and focused on a double-bottom line. Community Development Financial Institutions (CDFIs) in this credit environment are particularly focused on the needs of the residents in their community and rely on their philanthropic partners to enhance their ability to serve their community. ShoreBank was the largest CDFI in the country and as such, presented unique marketing challenges.

A quaint thought from Bair’s FDIC, but there is no such thing as a double- (or triple-, quaduple-, etc.-) bottom line – not that matters, anyway. If you cannot show a bottom line of profitability, or at least survivability, you fail – period. An abidance to any other corporate goal will not save your behind – at least, not unless your political connections extend you a life preserver. But that violates free markets by rewarding failure.

As I wrote two weeks ago, it should have been ShoreBank’s ideological soulmates (and investors) – Ford Foundation, John and Catherine MacArthur Foundation, and the Joyce Foundation – who should have come to its rescue. They were the believers, with billions of dollars in assets, in that “other bottom line” of progressivism in lending. Ford and MacArthur are part of the Urban Partnership investment team, but are only two of the fifteen listed in the coalition. The rest are mostly financial institutions, publicly traded, whose shareholders ought to be outraged that their executive leaders agreed to take this on. I doubt the progressive ideologues have much skin in the game.

And finally, ShoreBank’s “green” investment arm was saved also, as fellow community development institution OneCalifornia Bank will purchase ShoreBank Pacific. The Oakland-based mom-and-pop lender claims to have a “Triple Bottom Line,” which they say means they can meet “our social mission goals while operating in a safe, sound and sustainable manner.”

For these institutions “sustainability” is a code word for “needs government subsidies,” because their alternative energy schemes can’t survive without it. Watch for both OneCalifornia Bank and Urban Partnership Bank to look for more help in the not-too-distant future, as their other bottom lines continue to take down the one that really counts.

Paul Chesser is an associate fellow for the National Legal and Policy Center.

Related:

ShoreBank to be Split and Saved?

Can Chicago Lobbying Save ShoreBank?

Is ShoreBank Sheila Bair's Baby?

Goofy Green Investments Fueled ShoreBank's Problems

ShoreBank President Uses Saul Alinsky Playbook

White House Denial on ShoreBank is Sestak-Like

'Firestorm' Promised to Save Politically-Connected Chicago Bank

White House Bails Out ‘Clinton’s Favorite Bank’ Through Goldman Sachs, Citigroup, GE

[Nachum]

The list, ping

[Proud_USA_Republican]

If only they had shown this same love for Wamu and other financials/banks that could of, and should have, been provided the same attention to survive. But “Too big to fail” JPMC need their assets as part of their own bailout and now they, along with the rest of the TARP prostitutes, are required to scratch the current presidents back in return.

[Noob1999]

I received the following e-mail today, and spent about an hour on ShoreBank web-site, as well as Urban Partnerships, their new name. While some of the names are discussed in the banks discussion of their history, the sites history narrative stops in 2008.
ShoreBank was a very well connected bank, serving the minority populations in many locaations, as well as overseas micro-credit, and worked with gov. Clinton to establish a presense in Arkansas. The e-mail is long, and possibly connects many dots, but is it truthful??
The bank’s website gushes about Zer0, Michelle, and Hitlery being elected/appointed in 2008.

I’ll let the wisdom on this site determine the plausability of the writers conclusion.
____________________________________________________

Explanation of why passing Cap and Trade (Tax) is so important to Liberals.
______________

So . . . You think you know quite a bit about Obama and his band of thieves. Read on and see just how little you know. All of this comes together in the last part... a must read.
This is an interesting story put together from various articles and TV shows by the British Times paper. It shows what Obama and his friends are really all about. It’s not hope and change, it is money.
I warn you, the first part is a little boring, but stick with it. The second part connects all the dots for you (it will open your eyes). The end explains how Obama and all his cronies will end up as multi-billionaires. (It’s definitely worth the read. You will not be disappointed).

A small bank in Chicago called SHOREBANK almost went bankrupt during the recession. The bank made a profit on its foreign micro-loans (see below) but had lost money in sub-prime mortgages in the US. It was facing likely closure by federal regulators. However, because the bank’s executives were well connected with members of the Obama Administration, a private rescue bailout was arranged. The bank’s employees had donated money to Obama’s Senate campaign. In other words, ShoreBank was too politically connected to be allowed to go under.

ShoreBank survived and invested in many “green” businesses such as solar panel manufacturing. In fact, the bank was mentioned in one of Obama’s speeches during his election campaign because it subjected new business borrowers to Eco-litmus tests.

Prior to becoming President, Obama sat on the board of the JOYCE FOUNDATION, a liberal charity. This foundation was originally established by Joyce Kean’s family which had accumulated millions of dollars in the lumber industry. It mostly gave funds to hospitals but after her death in 1972, the foundation was taken over by radical environmentalists and social justice extremists.

This JOYCE FOUNDATION, which is rumored to have assets of 8 billion dollars, has now set up and funded, with a few partners, something called the CHICAGO CLIMATE EXCHANGE, known as CXX. It will be the exchange (like the Chicago Grain Futures Market for agriculture) where Environmental Carbon Credits are traded.

Under Obama’s new bill, businesses in the future will be assessed a tax on how much CO2 they produce (their Carbon Footprint) or in other words how much they add to global warming. If a company produces less CO2 than their allotted measured limit, they earn a Carbon Credit. This Carbon Credit can be traded on the CXX exchange. Another company, which has gone over their CO2 limit, can buy the Credit and “reduce” their footprint and tax liability. It will be like trading shares on Wall Street.

Well, it was the same JOYCE FOUNDATION, along with some other private partners and Wall Street firms that funded the bailout of ShoreBank. The foundation is now one of the major shareholders. The bank has now been designated to be the “banking arm” of the CHICAGO CLIMATE EXCHANGE (CXX). In addition, Goldman Sachs has been contracted to run the investment trading floor of the exchange.

So far so good; now the INTERESTING parts.

One ShoreBank co-founder, named Jan Piercy, was a Wellesley College roommate of Hillary Clinton. Hillary and Bill Clinton have long supported the bank and are small investors.

Another co-founder of Shorebank, named Mary Houghton, was a friend of Obama’s late mother. Obama’s mother worked on foreign MICRO-LOANS for the Ford Foundation. She worked for the foundation with a guy called Geithner. Yes, you guessed it. This man was the father of Tim Geithner, our present Treasury Secretary, who failed to pay all his taxes for two years.

Another founder of ShoreBank was Ronald Grzywinski, a cohort and close friend of Jimmy Carter.

The former ShoreBank Vice Chairman was a man called Bob Nash. He was the deputy campaign manager of Hillary Clinton’s presidential bid. He also sat on the board of the Chicago Law School with Obama and Bill Ayers, the former terrorist. Nash was also a member of Obama’s White House transition team.

(To jog your memories, Bill Ayers is a Professor at the University of Illinois at Chicago. He founded the Weather Underground, a radical revolutionary group that bombed buildings in the 60s and 70s. He had no remorse for those who were killed, escaped jail on a technicality, and is still an admitted Marxist).

When Obama sat on the board of the JOYCE FOUNDATION, he “funneled” thousands of charity dollars to a guy named John Ayers, who runs a dubious education fund. Yes, you guessed it. The brother of Bill Ayers, the terrorist.

Howard Stanback is a board member of Shorebank. He is a former board chairman of the Woods Foundation. Obama and Bill Ayers, the terrorist, also sat on the board of the Woods Foundation. Stanback was formerly employed by New Kenwood Inc., a real estate development company co-owned by Tony Rezko.

(You will remember that Tony Rezko was the guy who gave Obama an amazing sweet deal on his new house. Years prior to this, the law firm of Davis, Miner, Barnhill & Galland had represented Rezko’s company and helped him get more than 43 million dollars in government funding. Guess who worked as a lawyer at the firm at the time. Yes, Barack Obama).

Adele Simmons, the Director of ShoreBank, is a close friend of Valerie Jarrett, a White House senior advisor to Obama. Simmons and Jarrett also sit on the board of a dubious Chicago Civic Organization.

Van Jones sits on the board of ShoreBank and is one the marketing directors for “green” projects. He also holds a senior advisor position for black studies at Princeton University. You will remember that Mr. Van Jones was appointed by Obama in 2009 to be a Special Advisor for Green Jobs at the White House. He was forced to resign over past political activities, including the fact that he is a Marxist.

Al Gore was one of the smaller partners to originally help fund the CHICAGO CLIMATE EXCHANGE. He also founded a company called Generation Investment Management (GIM) and registered it in London, England. GIM has close links to the UK-based Climate Exchange PLC, a holding company listed on the London Stock Exchange. This company trades Carbon Credits in Europe (just like CXX will do here) and its floor is run by Goldman Sachs. Along with Gore, the other co-founder of GIM is Hank Paulson, the former US Treasury Secretary and former CEO of Goldman Sachs. His wife, Wendy, graduated from and is presently a Trustee of Wellesley College. Yes, the same college that Hillary Clinton and Jan Piercy, a co-founder of Shorebank attended. (They are all friends).

Interesting? And now the closing...

Because many studies have been exposed as scientific nonsense, people are slowly realizing that man-made global warming is nothing more than a money-generating hoax. As a result, Obama is working feverishly to win the race. He aims to push a Cap-and-Trade Carbon Tax Bill through Congress and into law.

Obama knows he must get this passed before he loses his majority in Congress in the November elections. Apart from Climate Change he will “sell” this bill to the public as generating tax revenue to reduce our debt. But, it will also make it impossible for US companies to compete in world markets and drastically increase unemployment. In addition, energy prices (home utility rates) will sky rocket.

But, here’s the KICKER (THE MONEY TRAIL).

If the bill passes, it is estimated that over 10 TRILLION dollars each year will be traded on the CXX exchange. At a commission rate of only 4 percent, the exchange would earn close to 400 billion dollars to split between its owners, all Obama cronies. At a 2 percent rate, Goldman Sachs would also rake in 200 billion dollars each year.

But don’t forget SHOREBANK. With 10 trillion dollars flowing though its accounts, the bank will earn close to 40 billion dollars in interest each year for its owners (more Obama cronies), without even breaking a sweat.

It is estimated Al Gore alone will probably rake in 15 billion dollars just in the first year. Of course, Obama’s “commissions” will be held in trust for him at the Joyce Foundation. They are estimated to be over 8 billion dollars by the time he leaves office in 2013, if the bill passes this year. Of course, these commissions will continue to be paid for the rest of his life.

Some financial experts think this will be the largest “scam” or “legal heist” in world history. Obama’s cronies make the Mafia look like rank amateurs. They will make Bernie Madoff’s fraud look like penny ante stuff.

[hoosiermama]

Here we go again! Only pausing to reposition the cons.

[ModelBreaker]

We have a new category of taxpayer funded bailout—THTF. Too Hip to Fail.

I was involved in the aftermath of a failed S&L in the 80’s. FSLIC did not turn the new bank (sans the bad debts which the FSLIC or FDIC assume) over to previous management. Instead, they sued every previous officer and tried to put several of them in jail.

It’s amazing what being buddies with the president will do for you. You tank a bank. Not only does the government pay all the debts of the old bank; but it turns the debt free new bank over to you. And, you don’t go to jail or get sued.

[clintonh8r]

I’m in banking. I currently do consulting for “zombie banks” like Shore, trying to help them survive until they can get additional capital or find a buyer. To put management from a failed bank back in place is virtually unheard of. Not saying it’s never happened, but this deal stinks like a Chi-town sewer....

[maggief]

In the case of Shorebank, the management and board was allowed to form Urban Partnership Bank as the new bank taking over the assets and benefiting from the FDIC loss sharing agreement. This can be considered a backdoor bailout of Shorebank that cost the FDIC Deposit Insurance Fund (DIF) $367.7 million. The management team survives even though they managed bad loans and overexposures to C&D loans at 358.4% and to CRE loans at 1839.2%. This is well above the regulatory guidelines of 100% and 300% of risk-based capital respectively. Shorebank’s loan pipeline was 98.4% funded. With the FDIC in the bailout mix, was this bank one of the 775 on the FDIC List of Problem Banks?

[Uncle Chip]

bookmarked

[dalebert]

ya ..take over...

[jazusamo]

Thanks for your post.

I don’t know the first thing about banking but what you just said seems like common sense to me, it’s got to be a political thing, IMO.