by Joel Pollak, candidate for Congress in 9th CD
ShoreBank will likely be closed today, after failing to raise enough capital to keep its doors open. It is sad to see a business fail, especially one that may have begun with noble intentions. Yet it is worse to see a bank propped up by political insiders using taxpayer money, while other businesses fail around it. That is what happened for the last several months, thanks to arm-twisting by my opponent and by the White House.
But now the game is over, partly due to sheer financial reality, partly due to the protests that we led on the streets of Chicago, and partly due to the announcement that TARP inspector general Neil Barofsky will investigate the ShoreBank bailout after all. Perhaps the final factor was the House Ethics Committee trial of Maxine Waters, who has been charged for her efforts to use her political influence improperly to help OneUnited Bank.
The OneUnited case is almost exactly the same as the ShoreBank case. Indeed, it is odd that Waters faces investigation and trial while Jan Schakowsky does not. What the Waters case may have done, regardless, is send a warning signal to the U.S. Treasury and to private investors. In the wake of Waters, a ShoreBank bailout would (and still may) lead to ethics charges. That may have been the ShoreBank bailout’s final undoing.
In the past several days, we have learned more about why ShoreBank failed. It is not in trouble, as Schakowsky and others suggest, because it lent to poor people or because it was the “victim” of Wall Street. According to David Roeder of the Chicago Sun-Times, the bank has $103 million in bad loans to “apartment buildings with five or more units”--i.e. to developers. That is only part of the story. There is much more to be revealed.
If nothing else, we ought to learn that the ShoreBank model, as the “iconic” community development bank (to use Schakowsky’s words), has failed. If we want to help the poor, we cannot do so by trying to profit in their name through loans insulated from risk by Washington bailouts and Wall St. handouts. The best way to help is to create jobs by growing the economy. That is where our focus should be as ShoreBank’s doors close.
First posted on Joel Pollak's Facebook Note page
