On Friday, the government moved to seize and temporarily shutter one of the truly heroic banking institutions of this dismal era for American finance — ShoreBank of Chicago. More precisely, ShoreBank of Barack Obama’s old neighborhood.
Over the years, since its founding in 1973, ShoreBank had enabled thousands of moderate income residents to become homeowners, and thousands of small businesses to get credit, without ever playing the subprime game or making a single predatory loan. It was a model bank that earned a modest profit by delivering on a social mission.
In the end, ShoreBank succumbed to the aftermath of a financial crisis made on Wall Street. Yet while the Treasury Department found hundreds of billions of dollars to rescue giant Wall Street institutions, it refused to come up with the $75 million for which ShoreBank qualified under the TARP program.
A number of stories that I’ve reported about the wrongheaded priorities of the Obama administration leave me bewildered and exasperated. This one leaves me really angry.
The bank will continue under new ownership and a new name, the Urban Partnership Bank, to be run by some recently hired ShoreBank executives, and which has pledged to keep the bank open and continue its basic philosophy. But owners of ShoreBank stock, which include many socially responsible investors, will have the value of their shares wiped out and the directors dismissed. And it remains to be seen whether some of ShoreBank’s social commitment will be compromised.
Today, there is a whole category of bank known as a community development financial institution. This category did not exist until it was invented in 1973 by ShoreBank, then known as the South Shore National Bank. But ShoreBank did not set out to create a banking category, only to help a distressed community.