Why Was ShoreBank Allowed to Fail?

In August, when the FDIC seized ShoreBank of Chicago, it represented the demise of the oldest community development bank in the United States. The bank, according to its Web site, will carry on as the Urban Partnership Bank, which absorbed ShoreBank’s core deposits and its assets that were in receivership. But some are asking why this bank, renown for socially responsible lending and caught up “in a crisis not of its own making,” according to The American Prospect‘s Robert Kuttner, does not qualify for TARP money. ShoreBank raised $150 million in new capital from many of the TARP-saved institutions, but still the Treasury Department did not yield the $75 million the bank sought. Kuttner says it’s political, preventing the appearance of helping a bank in the president’s old neighborhood. Or was it just not big enough to not fail? Unfortunately, we’re only left to speculate.

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