High-profile lender to poor areas seeks $75 mil. in bailout money
For Chicago's ShoreBank Corp., Job One is done. It has raised enough private capital to give it a fighting chance to survive.
But it's uncertain if it can complete Job Two, getting $75 million in federal bailout funds. ShoreBank, a prominent lender to poor communities in Chicago and other Midwest cities, needs the federal help to reach its capital goal of $200 million.
Sources said Tuesday that after overnight meetings, a group of Wall Street giants and some Chicago banks agreed to provide ShoreBank $125 million to $140 million. The saviors range from Goldman Sachs Group Inc. and Citigroup Inc. to Chicago's Northern Trust Corp. and PrivateBancorp Inc., sources said. A new infusion of about $20 million from GE Capital pushed ShoreBank over the top, they said.
There was no agreement, however, on the federal money. U.S. Rep. Jan Schakowsky (D-Ill.), who has taken up ShoreBank's cause, said she believes the Treasury Department's help has no strings other than the bank hitting its threshold of private capital. "It's looking good but nobody is talking at all," she said.
She said she is urging Treasury officials to help ShoreBank and other institutions that suffer from "the recklessness of the Wall Street banks."
For the big banks accused of abetting the nation's financial collapse, the rescue would buy favor in President Obama's administration. Obama has used ShoreBank as an example of enlightened community-based lending and his advisers know the bank from prior jobs.
ShoreBank has a dual mission of profits and community improvement. It was founded in 1973 when other banks redlined poor communities and its slogan, "Let's change the world," speaks to its mission.
Treasury officials could not be reached and the Federal Deposit Insurance Corp., which would handle a ShoreBank shutdown, declined to comment.
Conservative critics have said ShoreBank is getting special attention because of politics. Schakowsky and ShoreBank said the White House is not involved in the case and that they have not spoken with anyone on Obama's staff.
"We are continuing our capital raising efforts and the results we have achieved so far are encouraging," said ShoreBank President George Surgeon. "We are very appreciative of the efforts of all investors who have expressed support, those who have been with us over the years as well as new supporters; and we are also grateful to the people in our communities of Chicago, Detroit and Cleveland."
Eugene Ludwig, chief executive of Promontory Financial Group and an organizer of the private fund-raising, told the Wall Street Journal, "In the end, the financial service industry stood together and got this done. ShoreBank is an international symbol of hope for low- and moderate-income citizens, and the banking industry recognizes that it is too important to allow its leadership role to wither away."