ShoreBank, praised by Democrats, closed Friday by regulators

ShoreBank, a Chicago-area community lender praised by Democrats, was taken over by the government Friday and its assets sold.

Chicago-area Democrats pushed hard for regulators to extend bailout money to the bank from the government's $700 billion aid program. The bank, started in the 1970s, was praised by President Clinton and numerous other lawmakers and industry players.

In a statement late Friday, the Federal Deposit Insurance Corporation (FDIC) said it had taken receivership of the failed bank. Urban Partnership Bank, also in Chicago, will take over the deposits and the 15 branches.

ShoreBank had about $2.2 billion in total assets and $1.5 billion in deposits, according to the FDIC.

"In addition to assuming all of the deposits of the failed bank, Urban Partnership Bank agreed to purchase essentially all of the assets except for the marketable securities and fixed assets," the FDIC said in a statement.

The bank was the Midwest part of ShoreBank Corporation, a parent company with Pacific and international arms. “This is an important positive outcome for these communities,” said Mary Cahillane, chairman of ShoreBank Corporation. “While our preference would have been to recapitalize and continue ShoreBank’s Midwest bank, we are delighted that the communities that bank served so well for so many years will have access to a dedicated, high-quality, full-service community bank, led by a highly qualified management team."

Rep. Jan Schakowsky (D-Ill.) and several other Democrats pleaded with the Treasury Department to help the bank.

"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 told The Hill in July. “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.”

Republicans, particularly in the House, criticized Democrats for trying to prop up ShoreBank while other banks were allowed to failed.

The FDIC received only one bid for the bank and the failure will cost the deposit insurance fund $368 million. ShoreBank was the largest community development financial institution in the country, according to the FDIC.

Prominent financial firms had helped raise capital for the bank prior to its failure. Urban Partnership Bank has received investments from major industry players, including American Express, Bank of America, Goldman Sachs, GE Capital and others, according to the FDIC.

This story was updated at 8:41 p.m.