I have found evidence that may explain the intense interest of Rep. Jan Schakowsky (D-IL) in bailing out ShoreBank, the “community development” bank that has received extraordinary assistance from her and several other “friends in high places.”
The New York Times confirms that Rep. Schakowsky played a leading role in the ShoreBank bailout. Yet ShoreBank is not based in Rep. Schakowsky’s congressional district, and she did not help the Bank of Lincolnwood–which is in her district, and failed in 2009–or Park National Bank, which was also active in community development in Chicago until it was closed by federal regulators last year.
Now, court documents that I have obtained reveal that ShoreBank was one of several banks that Rep. Schakowsky’s husband, Robert Creamer, used in the check kiting scheme for which he was convicted and sentenced to federal prison in 2006.
When another bank, Cole Taylor Bank, refused to continue honoring his checks, Creamer turned to ShoreBank for help. ShoreBank evidently provided him with extra time to find over $1.4 million to cover the overdrafts.
As Creamer wrote to the U.S. Probation Officer prior to sentencing: “When I learned that Cole Taylor would no longer pay on uncollected funds, I immediately contacted South Shore Bank (now ShoreBank)–the bank most likely to incur an overdraft…”.
That helped Creamer’s organization, Illinois Public Action, avoid a catastrophic series of defaults, and enabled his attorneys to argue that no bank lost money as the result of his actions.
The result was that Creamer was given a fairly light sentence–five months in federal prison and eleven months of house arrest during which he was allowed to travel to and from Washington, DC.
Given these facts, Rep. Schakowsky’s role in the ShoreBank bailout is completely inappropriate. At best, she has a conflict of interest. At worst, she may be attempting to pay ShoreBank back for helping her husband and his organization.
The court documents also raise additional questions about the ShoreBank bailout. In his letter to the U.S. Probation Officer, Creamer also wrote that he kited checks because he was sure he would be bailed out by powerful friends: “…I knew of the receivables in the pipeline and I always knew that in the event of a serious problem there were many supporters who were ready and willing to come to the aide [sic] of the organization.”
That same pattern is reflected in ShoreBank’s recent operations, in which the bank made reckless investments, believing it could count on powerful friends to bail it out.
Indeed, ShoreBank obtained $35 million in federal stimulus funds, then used Rep. Schakowsky, Sen. Dick Durbin (D-IL), and former president Bill Clinton to press Illinois authorities for another $100 million. Finally, unable to raise the necessary capital from a near-bankrupt state, ShoreBank was able to obtain apparently politically-brokered favors from Wall Street, with personal help from Goldman Sachs CEO Lloyd Blankfein.
In addition, if Creamer was able to obtain special help from ShoreBank when his check kiting scheme fell apart, it is possible that ShoreBank has helped other powerful clients similarly.
A privately-funded bailout will allow ShoreBank to avoid close federal scrutiny of its operations. As taxpayers, we deserve to see a full, independent forensic audit before ShoreBank receives the $75 million in additional federal funds it needs to avoid closure, or obtains any other public assistance of any kind or from any source.