Shorebank Bailout: The Ties that Bind

The Central Illinois 9/12 Project became one of the first to expose — beginning this past March on BigGovernment.com — Shorebank’s extensive green and microfinancing agendas, in anticipation of that bank’s impending bailout. Shorebank, a Chicago-based, community-based investment bank, is focused on domestic and foreign microfinancing, is heavily engaged in the financing of “green” projects and “green” jobs, and has a host of ties to the Obama and Clinton administrations. Most recently, we wrote in April about Shorebank seeking a “bailout” from larger financial firms that have previously received bailout money from the federal government. Congresswoman Jan Schakowsky had previously proposed that the bank receive funds from the State of Illinois to help cover its loss of capital since the beginning of the nation’s economic downturn in 2008.

As we previously wrote, Shorebank would potentially be eligible for TARP funds if it were to be recognized as a “Community Development Financial Institution.” In order to to received needed federal TARP money and prevent seizure by the FDIC, Shorebank needed to receive appropriate matching funds from private sources. News stories have been released over the past several days indicating that Shorebank has potentially received such funding.

Shorebank has reportedly received $20 million from General Electric, $20 million from Goldman Sachs, and $20 million from Citigroup — with additional large funds being promised by J.P.Morgan Chase, Bank of America, and Morgan Stanley. Shorebank also has received funds from the Northern Trust Corporation, State Farm, and Harris N.A. It has been reported that the bank could also receive funds from Wells-Fargo and PNC Financial Services. Assistance from these financial institutions puts Shorebank’s raised capital from private sources within the range needed to make it eligible for TARP funds.

As we reported previously, Citigroup, Bank of America, and Chase all received tens of billions of dollars in taxpayer money from TARP. Does this then mean that Shorebank is being bailed out by bailout money?

And still yet, there is another layer to Shorebank’s impending bailout that must be exposed: cronyism. Mary Cahillane was named Executive Chair of Shorebank in November. Cahillane had previously worked at Bank of America as an operational risk executive. Goldman Sachs executive Lloyd Blankfein has been reported to have been personally involved (*site subscription required to access this link) in arranging for the assistance given to Shorebank.

Such assistance from Goldman Sachs would enable that bank to fulfill its “responsibilities” under the Community Reinvestiment Act (CRA) of 1977 to prevent discriminatory lending practices and increase lending in poor neighborhoods. And who was a strong advocate for the the passage of CRA? One of Shorebank’s founders, Ron Grzywinski, who appeared before Congress to advocate for the bill (and was the only banking executive to do so) and who served as on President Carter’s National Consumer Bank Board.

In addition, Goldman Sachs’ relationship with the White House has concerned some, as its executives have met with President Obama and/or his officials on multiple occasions — and Goldman Sachs and its employees have donated nearly a million dollars to President Obama’s presidential campaign.

In addition to Shorebank’s ties to President Clinton, Secretary Clinton, and President Obama, Shorebank also has ties with one of President Obama’s chief advisors, Valerie Jarrett. Jarrett served on the Board of Directors for Chicago Metropolis 2020, a civic organization headed by Shorebank director Adele Simmons.The ties between Jarrett and Simmons are depicted pictorially on Muckety.com.

Additionally, Ms. Jarrett works for Navigant Consulting. Current President and CEO of Navigant, William Goodyear, is currently an advisor to Shorebank.

These associations — and the eagerness displayed by various financial institutions to “rescue” Shorebank — lead necessaily to the questions now being asked by two Republican Congressmembers, Spencer Bachus (AL) and Judy Biggert (IL). A letter has been sent by Bachus (Ranking Member of the House Financial Services Committee) and Biggert (Ranking Member of the Subcommittee on Oversight and Investigations) to President Obama asking him to respond by June 2nd to a series of questions relating to Shorebank.

So our question is this: How is it that the federal government got into the business of picking winners and losers? Ten other Illinois banks closed in 2010 alone. Did those banks have the same opportunities as Shorebank? How is it that only Shorebank was able to secure such huge amounts of private funding? Do the intimate connections that the banks and individuals who are working to bail out Shorebank have with the Obama administration have anything to do with its ability to secure such funds? These questions must be answered, and we at the Central Illinois 9/12 Project will continue to ask these questions and seek their answers.