ShoreBank did fail in August, with the FDIC taking over $2.16 billion in faulty assets, including risky investments in urban real estate, from the bank. But the Wall Street money raised during the summer wasn’t returned. Instead, it used by ShoreBank’s management with the approval of the FDIC to form a new bank that will take over some of the bank’s better-performing assets and its deposits under a new name, the Urban Partnership Bank.
Officials on Wall Street have told the FOX Business Network that they felt political pressure from the Obama administration to contribute a total of about $150 million to recapitalize ShoreBank and the new institution. Valerie Jarrett, the president’s senior economic adviser has close ties to the bank, and the president himself has singled out the bank for praise for its community lending and for financing environmentally friendly green jobs. Jarrett has adamantly denied any involvement in the matter.
But now the FDIC’s IG is looking at what, if any, improper political pressure was put on Wall Street executives in trying to bail out ShoreBank, and in funding the Urban Partnership Bank, which could mean big trouble not just for senior administration officials but also for Bair, since she was on the front line in trying to convince top banking executives to cough up the money for the bailout during summer.