The hour of reckoning is fast approaching for ShoreBank.OK there are two scenarios right. Here they are!
All signs now point to the Federal Deposit Insurance Corp. seizing the South Side lender within the next few weeks.
As unlikely as it seems, though, it's still possible that a bank named "ShoreBank" will emerge from the failure with a mission similar to the one it has pursued for more than three decades — lending in low-income urban neighborhoods — beginning in Chicago's South Shore neighborhood in the 1970s.
One is a straight liquidation, in which the FDIC would reimburse insured depositors, close the branches and dispose of the assets later. In that scenario, ShoreBank would be consigned to history.Now if our local black-owned banks were willing to take up some of those assets from ShoreBank or at least some of those local branches located in black neighborhoods this could be a good thing.
The other is a management-led buyout, most likely funded in large part by some of the investors who committed $150 million to save ShoreBank but whose investment was predicated on an accompanying $75-million federal bailout that now is not forthcoming because of regulators' concerns that it won't be enough to keep the bank solvent.
In that case, the investors would acquire the branches, deposits and some of the good loans — essentially rebooting ShoreBank with a more cautious lending approach — while the FDIC would take on the bad loans for later disposal. Unclear is how much capital would be needed to back this effort, something presumably that management, investors and regulators will grapple with over the coming days.
That second scenario would be the “good bank, bad bank” approach that Fox News first reported earlier this week.
Ordinarily, when the FDIC begins an auction process for a bank that's failing, it takes four to six weeks to sort through the bids and prepare to seize the bank. But ShoreBank already went through that process earlier this year, averting failure at the time after putting together the $150-million rescue package.
As a result, sources say, the FDIC could seize ShoreBank anytime.
To be sure, an eleventh-hour bid with the FDIC by a bank or qualified investment group can't be ruled out, but there aren't any signs of that at the moment.