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ShoreBank Doesn’t Deserve a Second Bailout: Investigate This Mr. Barofsky

John on May 21, 2010 at 10:25 am

Recall that the whole point of raising $125 million from Citigroup, JP Morgan, B of A, GE, etc. was to make ShoreBank eligible for $75 million in TARP bailout funds. But don’t forget, ShoreBank already received $35 million in federal bailout money last year, just weeks before it was given a cease and desist by Treasury.

The obvious question to ask is why are we throwing good money after bad to save this one bank? Not to mention the other obvious question, why does a corporate titan like GE give a rip about a tiny Chicago bank? Have they helped bail out any other banks? Why this one? Could it be the political connections to President Obama and former President Clinton?

SIGTARP hasn’t made a decision yet, but they’re thinking about investigating:

“We received the request and we’re considering it right now,” said a spokeswoman for Neil Barofsky, the special inspector general of the Troubled Assets Relief Program, which administers federal bank bailout funds. “It’s under consideration.”

While there are no timetables for acting on the congressional request, “we always work as quickly as we can,” she said.

As he ponders, I’d just like to remind Mr. Barofsky of this story from January 18th. At the time, ShoreBank was looking to the State of Illinois for a bailout, considered an unprecedented move:

“None of us are prepared to let ShoreBank slip below the waves,” says IFA Chairman William Brandt, calling it a “unique, singular institution in banking history.”

Banking experts say they’re not aware of any previous bank bailout by Illinois or any other state. Federal bank regulators usually handle such bailouts. And banks the size of ShoreBank, with assets of $2.5 billion, don’t ordinarily attract attention at the upper levels of government.

[...]

Mr. Brandt cautions that his agency’s talks with ShoreBank are preliminary, and a deal depends on several factors…

He adds that he’s been told that the White House is concerned about ShoreBank. Like Mr. Obama, virtually all of ShoreBank’s leadership, including co-founders Ronald Grzywinksi and Mary Houghton, hails from Hyde Park.

Something tells me that Mr. Brandt is likely to have a sudden memory lapse unless he’s approached with the appropriate seriousness.

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