The shady Shorebank bailout revisited

By Michelle Malkin

August 5, 2010 08:17am

In May, I reported on the attempt by a coalition of government-corporate-leftwing advocacy interests to shore up the social justice banking poster child, Chicago-based Shorebank.

Yesterday, I told you about Shorebank’s latest dire financial reports, showing an even worsening capital deficiency than first thought.

Today, Bloomberg reports that the bailout deal may crumble:

ShoreBank Corp., the unprofitable Chicago lender to low-income communities, may be forced out of business after failing to win $75 million of federal bailout funds, three people with direct knowledge of the matter said.

ShoreBank raised more than $145 million in May from General Electric Co. and banks including JPMorgan Chase & Co. and Goldman Sachs Group Inc. That money was contingent on more federal funding that is now unlikely to be released, the people said, speaking anonymously because the matter is private.

“It looks like they are just out of options,” said Gerard Cassidy, a bank analyst at RBC Capital Markets in Portland, Maine. “Without a lot of private equity, their hands may be tied and the only option might be putting it in receivership.”

…The money raised in May was placed in an escrow account and is scheduled to be returned to investors tomorrow unless the government agrees to provide money or some other remedy can be found for the bank, according to a person who helped arrange the investments.

The White House denies it has played any role in trying to broker the bailout. But Shorebank’s Windy City ties to Obama are too numerous to ignore. And so is this administration’s penchant for bullying and bribery.

GOP Rep. Spencer Bachus wants an investigation into how the highly unusual, Goldman Sachs-led coalition to save Shorebank was formed — and at whose behest. Via Fox Business:

As if ShoreBank doesn’t have enough problems, the financially troubled but politically connected Chicago-based community lender is now facing a federal investigation into whether political pressure was applied to force several major Wall Street firms to bail out the bank before it was liquidated by banking regulators, FOX Business has learned.

Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, or TARP, which has agreed to earmark $75 million to help ShoreBank survive, has now bowed to pressure from Congressional Republicans and has agreed to investigate charges that key officials in the Obama White House, as well as FDIC chief Sheila Bair, pressured Wall Street firms to donate money to keep ShoreBank alive.

In a letter to Congressman Spencer Bachus, ranking member of the House Banking Committee, Barofsky said his office has “agreed to do an audit” of the federal program that granted ShoreBank the money about two months and examine the “issues raised” in a letter Bachus sent to the White House, asking for records and other documents detailing whether key administration officials played in role in convincing Wall Street to help bail out the bank.