Saturday, May 15, 2010

Goldman Sachs pledges $20 million to ShoreBank

Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein and a consortium of other top banks are part of an effort to save ShoreBank Corp. a Chicago bank with Washington ties, a Democratic activist close to the institution said on Friday.

Goldman, Citigroup, JPMorgan and Bank of America are helping raise the $125 million the community development lender needs to avoid a government takeover, said Bill Brandt, chairman of the Illinois Finance Authority.

"My understanding is that Goldman Sachs has made a significant commitment and will act on this commitment today," Brandt said. "Whether this deal gets finally cooked is a Herculean task."

Brandt said Goldman agreed to contribute more than $20 million to help rescue the bank.

JPMorgan is considering a financing package of about $15 million that would include converting existing debt to equity as well as a cash investment, a person familiar with the bank's plan said. The second-largest U.S. bank is already an investor in Shore Bank.

Goldman Sachs, Citigroup and JPMorgan declined to comment. Bank of America did not immediately respond to a request for comment.

A person familiar with the capital-raising efforts said ShoreBank is $10 million to $15 million short of the $125 million capital target set by regulators.

The bank hopes to get enough commitments today to get the full amount required, the source said, speaking anonymously because of the sensitivity of the matter.

ShoreBank, which has $2.3 billion in assets and is nationally recognized for its programs to lend to low-income communities, faces a Monday deadline to show it has met regulators' capital demands.

"We're working expeditiously on our capital raise, and we appreciate all parties, including a number of banks, who are supporting us in this effort," said Brian Berg, a spokesman for ShoreBank.

He declined to name any institutions helping in the effort.

The Wall Street Journal reported that Blankfein had discussions with Federal Deposit Insurance Corp Chairman Sheila Bair about helping the bank. The FDIC declined to comment.

Goldman Sachs has been trying to burnish its image after confronting political pressures and populist anger over its quick turnaround and perceived lack of concern over the economic downturn.

Its image was further tarnished last month when the U.S. Securities and Exchange Commission brought fraud charges against the firm.

ShoreBank has kept a high profile in the community development world.

It focuses on loans that contribute to environmental efforts and targets borrowers looking to convert deteriorated apartment buildings into income-producing properties, expand small businesses, and upgrade homes and property.

It was especially hard hit during the recession, reporting a net operating loss of $53.6 million in 2009. In 2008 it eked out net operating income of $1.3 million.

The bank has powerful ties to Washington, displaying on its website a YouTube video of a news report that links ShoreBank with President Barack Obama when he was a senator.

Helping lead the bank's capital efforts is prominent Washington figure Eugene Ludwig, former comptroller of the currency and now chief executive of Promontory Financial Group.

Ellen Seidman, a former head of the Office of Thrift Supervision, serves as executive vice president of national policy and partnership development at ShoreBank.

Seidman is also a founding council member in Goldman Sachs' "10,000 Small Businesses" initiative.

Berg was careful to note that no one within ShoreBank has reached out to anyone in the White House.

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