Understanding Government

The FDIC claims that Community Bank of Oak Park River Forest is not keeping up its part of the bargain as a community bank.  Steve Daniels of Crain’s Chicago Business reports that the Federal Deposit Insurance Corporation accuses the suburban Chicago bank of “substantial non-compliance” with the Community Reinvestment Act — the 1977 law that requires banks to lend and invest in low-and-moderate income communities.

Only 14 of more than 7,500 banks inspected by FDIC officials have sunk to the level of “substantial non-compliance.” Community Bank’s problems partly lie with not investing in Austin, the very poor Chicago neighborhood just east of Oak Park.

Here is one Republican investigation of Barack Obama that may have hit a dead end. The Obama administration did not inappropriately try to save erstwhile Chicago community lender ShoreBank, concludes an FDIC inspector general report. Steve Daniels of Crain’s Chicago Business summarizes the report, requested by House Republicans who were suspicious that Barack Obama called on Wall Street giants to bail out a bank in the president’s former backyard. FDIC Chairman Sheila Bair, in fact, did call Wall Street firms but the “calls were motivated by reducing the potential losses to the FDIC’s insurance fund rather than any political favoritism.”

FDIC released a report last week on the irresponsible mortgage lending that lead to ShoreBank’s demise. The company’s remaining assets were merged into Chicago-based Urban Partnership Bank.

The Federal Deposit Insurance Corporation, the lead agency in setting conditions to keep banks stable and your bank account safe, says senior bankers will have to defer receiving 50% of annual bonuses for three years,  according to reporting by Eric Dash in the New York Times.  The FDIC, which took this decision unanimously, may also require senior bank executives to take their bonuses in cash instead of stock, in order to discourage them from taking undue risks.

There will surely be claims that this is creeping socialism, but as soon as it’s done (and as soon as these bankers get their first deferred bonus money after three years), this will be understood as a sensible control on people whose job it should be to invest other people’s money more wisely than they have in the past.

Here is the bad news and good news about bank failures. (more…)

With the news that the FDIC is investigating at least fifty banks and their top managers for possible criminal activity at “failed banks of all sizes in cities across the U.S.,” the public is finally getting some indication that those who profited from the country’s economic downturn may be punished.  Jean Eaglesham brings this story in the Wall Street Journal.  This investigation does more than reassure us that someone is looking out for our interests; it also gets at a nagging reality that emerged when some banks failed and some succeeded: (more…)