ShoreBank Corp., a small Chicago-based bank whose motto is "Let's change the world," Thursday reportedly raised $150 million from a group of large financial services firms including Goldman Sachs Group (GS), GE Capital and Citigroup (C), according to the Financial Times.
Some Republicans in Congress are questioning whether politics played a role in the decision of such large firms to assist such a small bank based on the South Side of Chicago.
Goldman Sachs CEO Lloyd Blankfein played a "personal role" in arranging the rescue, the FT says. A source familiar with the matter tells DailyFinance that Blankfein did "make some calls," but added that the New York-based bank felt no White House pressure to do so.
Facing Political Pressure?
Charlie Gaspirino of Fox Business News is reporting that ShoreBank has ties to the Obama administration because Valerie Jarrett, President Obama's senior adviser, served on the board of Chicago Metropolis 2020, a civic organization run by Adele Simmons, a director at ShoreBank. He also reported that "several executives at Wall Street firms say they are facing some political pressure to bail out the bank from Washington."
Bloomberg News reported that former ShoreBank executive Robert Weissbourd served on the president-elect's transition team.
Goldman, which denies Securities and Exchange Commission civil fraud charges that it duped investors into buying mortgage-backed securities that were secretly designed to fail, declined to comment. The investment bank invested $20 million in ShoreBank, a person familiar with the matter says.
ShoreBank, whose work in lending to low-income communities has been praised by President Obama, declined to comment. "We have nothing to say at this point," bank spokesman Brian Berg says.
Referred to Bank Regulators
The White House denies ShoreBank got any improper help.
"White House officials have not met with ShoreBank regarding support measures for their bank, nor has the White House 'made asks' of financial assistance to other financial institutions for ShoreBank," Amy Brundage, a White House spokeswoman, tells DailyFinance. "Questions that come to the White House from institutions regarding the CDFI [Community Development Financial Institution] program are referred to the Treasury Department or to their bank regulator, who are the ones that decide these matters."
Rep. Spencer Bachus, (R-AL), the ranking member on the House Financial Services Committee, is outraged and is demanding an investigation by Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, or TARP. He is also demanding relevant documents from the White House including any involving Blankfein.
"In a year in which hundreds of banks are expected to fail, it is good news that this troubled institution has managed to survive," Bachus and Rep. Judy Biggert (R-IL) wrote yesterday in a letter to Obama. "The question that many are asking, however, is why did government-supported Wall Street institutions decide to save ShoreBank rather than numerous others that faced a capital shortage."
ShoreBank, which says it has $2 billion in assets, serves Chicago, Detroit and Cleveland, with a mission to invest "in people and their communities to create economic equity and a healthy environment," according to its website. Several media reports say that the bank needs to raise as much as $300 million.
ShoreBank Wins Friends on Wall Street, Critics in Washington