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The financial condition of Chicago's ShoreBank Corp., which anxiously awaits word on a lifeline from the Treasury Department, has become precarious after a disastrous second quarter.
August 5 -
There's a joke making the rounds in Chicago that if BP and Toyota were serious about repairing their damaged reputations, they, too, would have helped bail out ShoreBank.
July 1 -
A day after financial companies banded together to rescue ShoreBank in Chicago with a $140 million investment, two Republican lawmakers are asking President Obama about his involvement.
May 19 -
The lifeline that ShoreBank in Chicago has been thrown by some of the nation's largest financial companies could turn out to have benefits for other community development banks.
May 18
If ShoreBank is trying to get open-bank assistance, the wobbly Chicago lender's odds of success are long.
Reports citing anonymous sources say that the management team of the $2.2 billion-asset bank is pursuing a rescue deal that would recapitalize the critically undercapitalized bank with the Federal Deposit Insurance Corp. taking the problem assets for later disposal. The team would probably use at least part of the $140 million it has in escrow from several of the largest banks in the country.These investors have given ShoreBank until Monday to come up with a plan. A spokesman for the bank would not comment.
Open-bank deals are a longshot these days, industry lawyers said.
"The FDIC just hasn't had an appetite for open-bank deals, but if you don't have any good alternatives, you try every alternative," said Chip MacDonald, a partner at the Jones Day law firm in Atlanta.
Open-bank deals were popular in the 1980s and 1990s, but under the Federal Deposit Insurance Act of 1993, they can only be done if the existing shareholders are wiped out or if the bank is deemed systemically important. Open-bank aid would also have to prove to be the least costly resolution.
Some advocates have argued that ShoreBank is systemically important to Chicago's south and west sides. Experts said the FDIC would probably be unmoved by that reasoning.
Recent ethical misconduct charges brought against Rep. Maxine Waters, D-Calif., for her involvement in helping a community development bank secure a Treasury Department infusion do not help, either. Given ShoreBank's political connections to the Obama administration, any kind of exception for it would light a political firestorm, said Kip Weissman, a partner at Luse Gorman. "Obama and the entire Democratic party would be pilloried if [ShoreBank] got open-bank assistance," he said.
