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Big banks to ShoreBank's rescue
A ShoreBank branch in Chicago's Bronzeville neighborhood.
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Kai Ryssdal: The Federal Deposit Insurance Corporation has taken over 72 failed banks so far this year. Chicago-based ShoreBank was set to become number 73. But the community lender's going to live to see another day -- thanks to some friends on Wall Street. A group that includes Goldman Sachs, JPMorgan, Citigroup and General Electric has ponied up the $125 million that ShoreBank needed to stay afloat.
Marketplace's Jeremy Hobson reports now from New York that Goldman and the gang might be able to charge this particular effort to their public relations budgets.
Jeremy Hobson: You'd be forgiven if you've never heard of ShoreBank. But President Obama sure has. When he was a senator, he visited Kenya and promoted a ShoreBank microlending effort there.
President Barack Obama in Kenya: We've been talking to the health minister and others to find out what we can do to create more businesses in this community.
So it sorta seems like the perfect PR move for a bunch of big investment banks that know what it's like to be bailed out to jump in and save ShoreBank in its time of need.
Eugene Ludwig: No, I don't think that's it.
Eugene Ludwig is CEO of Promontory Financial Group. He helped pool together the investors that are bailing out ShoreBank. He says the rescue is all in keeping with what he calls the big banks' "tradition of civic responsibility."
Ludwig: This is an institution that's recognized by world figures all over the world, and for it to have failed would have been, I think, a blow not just to the Midwest, and not just to the people at Shorebank, but to U.S. prestige and leadership in this important area of global development.
It may also keep a lot of voters happy. Ronald Glancz chairs the financial services group at the Venable law firm in Washington. He says regardless of the banks' motivations for stepping in, if they hadn't, there would be a lot of low-income people with no access to cash.
Ronald Glancz: And I think by saving the bank, you also save the small businesses and the borrowers who really don't have any place else to turn.
Glancz says it's a smart move for unpopular banks, and an opportunity to show a skeptical public their good side -- even if it might look a little obvious.
In New York, I'm Jeremy Hobson for Marketplace.
This story came out of nowhere. it gave short schrift to this development. i have had an IRA with this bank (formerly South Shore bank) since the 80's. The story following this one belies the real issue and should have been tied in, that is this bank began by funding housing rehab and neighborhood development on a small scale, when nobody else would. perhaps ambitious expansion (of socially reponsible community lending)did them in...but I feel this is an untapped story, and NPR/PRI should be more on the ball. also, Chicago has gentrified greatly and torn down huge amounts of housing, residents being outsourced. Perhaps also cover the Ariel fund, another progressive (minority) Chicago financial outfit. Lack of depth and info on this institution and its philosophy. Unfair to couch this "bailout" as yet another Wall Street casualty-this IS Main Street.
