John on May 25, 2010 at 8:37 am
You have to read between the lines a bit, but only a bit:
While a severe recession certainly played a role, an examination of ShoreBank’s financial statements and interviews with former employees and analysts show that ShoreBank brought many troubles on itself. An ill-timed, overly aggressive expansion at the height of the credit bubble, a headlong push into risky markets on Chicago’s West Side and to the inner city of Detroit, and an unwillingness to foreclose on troubled loans combined to weaken the bank to the point that regulators last July ordered a major recapitalization.
“The question comes up, was this bank managed as well as it could have been?” said Bert Ely, head of Ely & Co., a bank consultancy based in Alexandria, Va. “Or were they too much into the social-welfare thing?”
A look at ShoreBank’s financial statements over the last five years shows how the bank’s social mission may have led to practices that put off tough decisions and placed the entire operation at risk.
The story goes on to say that the bank avoided foreclosures even when they were clearly indicated. Apparently, no one on the board had the guts to say what they must have known, i.e. ShoreBank is a financial institution not a charity.
It’s a bit ironic that, in trying to hold off ShoreBank’s seizure by the FDIC, the administration’s friends and the taxpayers are mirroring ShoreBank’s own treatment of default borrowers. With $100 million in losses last year alone, the sensible move would be to shut it down. Is there anyone in this administration who will do what ShoreBank’s board would not? Or is this one lesson this administration simply refuses to learn.
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