Steve Daniels of Crain's Chicago Business reports that Aurora, Illinois-based Old Second Bancorp Inc. will stop paying dividends to the Treasury Dept. under the TARP program. The arrangement highlights how non-Wall Street firms are still reliant on TARP and also the continued -- questionable-- generosity shown to even medium-sized banks. Old Second Bancorp was burned by real estate loans, and in January 2009, the Treasury Dept. propped up the bank with the purchase of $73 million in preferred shares. The bank continued to take a nose dive, losing $60.6 million in the first half of 2009.

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.

Adam Doster of Progress Illinois looks at government’s unsatisfactory response to the growing foreclosure crisis– foreclosures in Illinois were up 33 percent in July compared to the year before. Doster writes that while state and local government could do more, the real culprit is the federal government:

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

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.

In order to pay for financial regulatory reform, Congress transferred what funds remain from the Troubled Asset Relief Program a/k/a TARP (a/k/a the $700 billion bailout of Wall Street marked by its unpopularity -- and success in stabilizing the financial market). Paul Merrion of Crain's Chicago Business reports that this is unlikely to affect banks that have applied for TARP money, such as Chicago's ShoreBank.

Which of these statements is closer to the truth?: A.) Chicago-based ShoreBank is a well-intentioned community lender that inevitably fell victim to the recession or B.) Mismanagement caused ShoreBank need for a federal bailout.

The Chicago Sun-Times' David Roeder reports that two congressional Republicans want White House records to see if Barack Obama pressured Wall Street titans like Goldman Sachs to bailout South Shore Bank, a community lender on Chicago's South Side. One of the Republicans is Judy Biggert, who represents DuPage County in NW Illinois. Obama has old ties to South Shore bank, which provided loans for low-income residents in the president's former Hyde Park neighborhood.