[caption id="attachment_10336" align="alignleft" width="168" caption="Alex Giannoulias"][/caption] Reuters relays an FDIC inspector general report that concluded the seizure of Chicago's Broadway Bank, owned by the family of U.S. Senate candidate Alexi Giannoulias, was not politically motivated. The critical issue here is that it was known for months Broadway would go under (the bank made excessive subprime loans and, most notoriously, loaned to mobsters), including when Giannoulias was running in the Democratic Primary that he narrowly won in February. FDIC took over Broadway and transferred its assets to MB Financial in April.  This may have been the best time for such news to hit the Giannoulias campaign: after the primary but well before the general election.

A fifth bank that received TARP funds, California's Sonoma Valley Bank, has gone belly up, reports Damian Paletta of the Wall Street Journal, bringing taxpayers' losses to close to $3 billion. The closure, which was seized Friday by the FDIC, wipes out the $8.7 million of taxpayers' money conveyed by federal officials to try and shore up the bank's bad loans.

As had been anticipated for weeks, the FDIC seized Chicago's ShoreBank Friday evening. The South Side community lender lost hundreds of millions in the subprime mortgage crisis. More surprising is that ShoreBank will be revamped as Urban Partnership Bank.

Another week, another Illinois bank put into FDIC receivership. Late last Friday, the Federal Deposit Insurance Corporation took over Palos Bank and Trust Co., in the southwest Chicago suburb of Palos Heights. The Associated Press reports that First Midwest Bank of Itasca, Illinois will take over the bank's $467 million in assets and share losses with the FDIC on $343 million in debt. The FDIC takeover comes a week after the feds seized Chicago's Ravenswood Bank and also arrives amid talk that prominent Chicago lender ShoreBank will fail. Nationally, the FDIC has taken control of 110 banks this year compared to 77 at this time last year. Illinois alone has seen 14 bank failures in 2010. The AP has an interesting explanation for the increase in bank takeovers:

The saga of Chicago’s ShoreBank is drawing to a close – despite the support of major Wall Street firms and perhaps President Obama, the community lender will likely go into FDIC receivership. Steve Daniels of Crain’s Chicago Business reports that “there are two probable scenarios” for the bank:

Chicago-based ShoreBank may be a goner after it lost at its attempt to get $75 million of Treasury Dept. TARP money. James Sterngold and Robert Schmidt of Bloomberg News explain that the bank applied to a TARP bailout program for community banks that invest in poor areas. Indeed, the case for saving ShoreBank revolved around its investment in Chicago's South Side as well as

ShoreBank, a community lender on Chicago’s South Side, is in bigger trouble than first thought – and the Obama administration may now let the bank fail.  The Chicago Tribune’s Becky Yerak reports that ShoreBank must raise at least $190 million in order to qualify for a $75 million Treasury Dept. TARP loan. Banking regulators arrived at the $190 million number after an awful 2nd quarter for the lender. Previously, the Treasury Dept. estimated that ShoreBank needed to come up with

Steve Daniels of Crain's Chicago Business caught this at the close of business Friday: the federal rescue of Chicago's ShoreBank has been postponed for at least another three weeks. The distressed community lender made national headlines in May when Wall Street titans including Goldman Sachs and Bank of America pledged $150 million to prevent an FDIC takeover. The Treasury Dept. was then expected to chip in $75 million of TARP funds, and with the combined $225 billion Shore Bank would be back on its feet. But the Federal Reserve has advised Treasury that ShoreBank needs more than $225 million (it's not clear how much more) -- hence the delay in TARP money. There is some justice in big banks that received multi-billion TARP bailouts helping out smaller banks that weren't immediately rescued by the Treasury Dept.

TARP is on its last legs, but 37 Chicago-area banks have more in problem loans and foreclosed property than they do capital. This means that more successful Chicago banks could start to make Treasury Dept.-like deals and provide equity to struggling banks. Steve Daniels of Crain's Chicago Business profiles Ed Wehmer, CEO of Lake Forest-based Wintrust Financial Corp., which has weathered the financial meltdown fairly well. Wehmer saw the success the Treasury Dept. had in buying common stock from large financial outfits like Bank of America.

Steve Daniels of Crain's Chicago Business highlights something important about what happens in a Federal Deposit Insurance Corporation bank takeover -- other lenders circle like sharks to buy the failed bank.