Understanding Government

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. (more…)

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: (more…)

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 (more…)

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. (more…)

Is a prominent Chicago bank suddenly careening towards FDIC receivership? Lorene Yue of Crain’s Chicago Business reports that ShoreBank, with headquarters on Chicago’s South Side, must raise $300 million in order to avoid a federal takeover.

It had first been reported that ShoreBank cobbled together enough money to stay in business. (more…)