By Silla Brush - 07/08/10 10:09 PM EDT
Chicago-area Democrats are urging the Treasury Department to help a troubled community bank with money from the $700 billion financial bailout fund.
Four House members pushed the department in mid-June to provide federal money to ShoreBank, a prominent Illinois-based bank that serves low- and middle-income customers. High-profile Democrats, including former President Bill Clinton, have praised the bank’s work.
ShoreBank raised roughly $150 million from other banks, nonprofits and philanthropies as part of its application for help under the Troubled Asset Relief Program (TARP). The bank would be eligible for roughly $70 million in federal help, according to Brian Berg, a ShoreBank spokesman.
Illinois Democratic Reps. Bobby Rush, Danny Davis, Jesse Jackson Jr. and Jan Schakowsky wrote to Treasury Secretary Timothy Geithner urging the department to help ShoreBank.
The lawmakers said the department’s process of approving applications “has been misguided, lengthy, and opaque.” The bank applied for a portion of the $1 billion in bailout funds that have been set aside for firms known as Community Development Financial Institutions.
The program was first announced late last year, but Treasury has yet to commit any of the money allocated for it. The department said the awards would be made soon.
“Mr. Secretary, you have the ability to bring ShoreBank back to life, but quick action is essential,” the House members wrote.
Schakowsky told The Hill it would be a “tragedy” to let community development banks go under.
“It’s so frustrating that billions of dollars are given to the big banks. Everybody is crying for credit, particularly in these needy communities. The big banks certainly aren’t coming to the rescue here,” Schakowsky said Thursday. “Here is a bank that has a long history, 37 years of serving these communities, and now there is some games being played that could end in the demise of this bank.”
Davis told The Hill it was a "no brainer" to try to help the bank.
"ShoreBank has been one of the best friends that low-income communities, low-income small businesses and people just trying to have access to capital that I have ever encountered," he said.
Assistant Treasury Secretary Herbert Allison Jr. told the lawmakers that he could not comment on ShoreBank’s application.
“We cannot comment, because Treasury guidelines generally prohibit Treasury officials from discussing specific applications for EESA funding,” he wrote, referring to the 2008 Emergency Economic Stabilization Act that set up $700 billion bailout. “These guidelines are intended to protect confidentiality and to limit improper influences on funding decisions.”
Republicans have criticized ShoreBank’s application for help and charged that the Obama administration has intervened on the bank’s behalf. Rep. Judy Biggert (R-Ill.) pushed legislation recently requiring a federal investigation into whether the administration specifically helped the bank.
“At a time when hundreds of other banks are failing, including dozens here in Illinois, why was this bank singled out?” Biggert said in late June.
Berg, the ShoreBank spokesman, said the bank has not sought help from the White House.
“The bank has not reached out to the White House and vice versa,” Berg said.
The White House has not met with the bank or “made asks” of other financial firms to support ShoreBank, said Amy Brundage, White House spokeswoman.
Berg said the bank also did not ask the House members to write the letters supporting their application.
“Obviously, we have been in their communities and they care about their constituents, and they are genuinely concerned about the bank and their districts,” he said.
Jan Piercy, executive vice president at ShoreBank, wrote an e-mail to a Treasury undersecretary, urging the department to help local banks.
“I applaud the wisdom of designing a program insulated from politics by a stipulated process. However, the program requires clarity — and, most important — the judgment to stand with viable though stressed institutions that are willing to stay in hard-hit communities,” Piercy wrote in an e-mail dated June 20. “Institutions that have successfully raised additional private capital to withstand losses and that are devising business plans that can work in protracted high unemployment conditions warrent [sic] support.”
Other industry associations and interest groups have urged the government to act quickly on the program.
The CDFI Coalition, Community Development Bankers Association, National Community Investment Fund and others have pushed Treasury and other regulators to move on the program and restructure how it works.
The Community Development Bankers Association criticized the review process in particular and the different standards banking regulators have applied as they review applications.