Joe Biden’s younger brother James received a series of “unusually generous” bank loans during the 1970s, while the former vice president served on the Senate Banking Committee.
Politico reported on Friday that James Biden, who has a history of murky financial dealings, was able to parlay his role as the chief fundraiser for his brother’s 1972 Senate run into the startup capital required to open a nightclub.
The loans were considered “unusually generous” given that the younger Biden was a salesman without any business experience and purportedly had a net worth of less than $10,000 at the outset of the venture in 1973. Another key component of the story, which was widely covered by local media in Delaware and Pennsylvania at the time, is that the loans appeared to draw concerns over influence peddling, as Joe Biden had just been appointed to the Senate Banking Committee.
“No sooner was freshman lawmaker Joe Biden seated on the Senate Banking Committee,” Politico reported, “than James became the beneficiary of business loans that were described … as unusually generous because of the relatively large amount of money he was able to borrow with little or no collateral and a lack of relevant prior experience.”
The first series of loans — totaling $165,000 — were provided by Wilmington’s Farmers Bank, which, although privately managed, was partially owned by the public with the state of Delaware having a 49 percent stake. The Wilmington Morning News reported in 1977 that of the total, $60,000 was “unsecured,” meaning that James Biden was “personally liable” for its repayment.
Despite the extensive startup capital, the nightclub failed to turn a profit and by 1975 had run up debts totaling more than $500,000. Unable to pay their bills, James Biden and his business partners, which by then included his brother-in-law John T. Owens, turned to First Pennsylvania Bank for a bailout.
The exact manner in which the loan, for $300,000, was arranged is unclear, especially as James Biden only had a total net worth of $10,050 at the time. It appears the loan came through after the incumbent governor of Pennsylvania made a recommendation on the nightclub’s behalf. Regardless, the money did not last long and by 1977, James Biden was forced to surrender the club to creditors after incurring more than $700,000 of debt.
During the same time period James Biden was receiving the extensive lines of credit, Joe Biden was sitting on the Senate Banking Committee, which had purview over the financial sector. A specific jurisdiction of the committee was the Federal Deposit Insurance Corporation (FDIC), which provides bailouts to banks if they should become over leveraged.
Such a bailout was required by Farmers Bank in 1976 when it nearly collapsed after all the troublesome loans, like those to James Biden, it made could not be repaid. The bank only survived after the FDIC and the state of Delaware threw it a lifeline by purchasing a majority of the problematic loans.
Although the bank was brought back from the brink of ruin, its problems were not cleared up immediately. A number of the bank’s executives, including its former chairman, were indicted for fraud and other financial crimes. The scandal quickly ensnared other financiers from Delaware’s banking community and the elected officials supposedly regulating them.
“A Delaware banking commissioner was found to have received a loan from Farmers while overseeing its finances, an apparent violation of federal law,” Politico reported. “Separately … The DOJ also scrutinized unusual loans made by Farmers, including the Biden loan.”
A few months afterwards, Joe Biden departed the Banking Committee in order to take a seat on the more prestigious Senate Judiciary Committee.
Throughout the entire ordeal, James Biden maintained his brother was not involved in the business at all or aware of the generous loans. It appears, though, Joe Biden’s name and reputation as a senator was enough for some of institutions, like Farmers, to continue lending to his brother.
“Former bank officers [at Farmers] said they figured the Biden name would help attract a trendy free-spending crowd to the handsomely appointed club,” the Delaware News Journal stated when reporting on James Biden’s debts in 1977.
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