The Corner

It’s a TARP! Community Bankers Edition

Congress is back (cue the sound of thousands of Corner readers instinctively checking to see if their wallets are missing), and one of the Democrats’ top priorities is to pass a bill that would create a TARP-like program giving the Treasury Department the authority to “invest” up to $30 billion in community banks, ostensibly so that those banks can make more credit available to small businesses. 

If you want to know where this process is likely to lead, take a look at the recently failed community bank ShoreBank and you’ll come away with a pretty good idea:

The Federal Deposit Insurance Corporation has a few rules it typically follows when it takes over a failed bank. One of these prohibits the failed bank’s old investors and old management team from having anything to do with the new bank, for obvious reasons. But ShoreBank, which the FDIC seized last month, was anything but typical. Founded in the 1970s to provide financial services to low-income communities on Chicago’s South Side, it used its politically attractive mission to gain powerful friends and become the largest community-development bank in the United States, with subsidiaries in Chicago, Cleveland, and Detroit, a number of non-profit arms, and a sister bank, ShoreBank Pacific, whose mission was to finance environmental projects and green jobs. At its height, ShoreBank could count among its many political patrons Bill and Hillary Clinton, Senate majority whip Dick Durbin, and Pres. Barack Obama. It was the Left’s favorite bank, which is why the FDIC’s atypical intervention is raising eyebrows on the right.

The FDIC relieved ShoreBank of its most toxic assets but left largely intact its management team — a highly unusual move. More important, it left intact the bank’s toxic business model, which used government-insured deposits and subsidies to pursue activities best left to non-profits: Think Fannie Mae and Freddie Mac on a smaller scale. The difference is that, while even former Frannie fans have acknowledged that their business model was fundamentally flawed, support for community banks is running in the opposite direction. Democrats and some Republicans are pushing for the creation of a $30 billion fund to subsidize them and encourage them to expand rapidly into new lines of business. The rise and fall of ShoreBank shows us why that would be a terrible idea.

Read the rest here.


Most Popular

Politics & Policy

Students’ Anti-Gun Views

Are children innocents or are they leaders? Are teenagers fully autonomous decision-makers, or are they lumps of mental clay, still being molded by unfolding brain development? The Left seems to have a particularly hard time deciding these days. Take, for example, the high-school students from Parkland, ... Read More

Romney Is a Misfit for America

Mitt’s back. The former governor of Massachusetts and occasional native son of Michigan has a new persona: Mr. Utah. He’s going to bring Utah conservatism to the whole Republican party and to the country at large. Wholesome, efficient, industrious, faithful. “Utah has a lot to teach the politicians in ... Read More
Law & the Courts

What the Second Amendment Means Today

The horrifying school massacre in Parkland, Fla., has prompted another national debate about guns. Unfortunately, it seems that these conversations are never terribly constructive — they are too often dominated by screeching extremists on both sides of the aisle and armchair pundits who offer sweeping opinions ... Read More

Fire the FBI Chief

American government is supposed to look and sound like George Washington. What it actually looks and sounds like is Henry Hill from Goodfellas: bad suit, hand out, intoning the eternal mantra: “F*** you, pay me.” American government mostly works by interposition, standing between us, the free people at ... Read More
Film & TV

Black Panther’s Circle of Hype

The Marvel Cinematic Universe (MCU) first infantilizes its audience, then banalizes it, and, finally, controls it through marketing. This commercial strategy, geared toward adolescents of all ages, resembles the Democratic party’s political manipulation of black Americans, targeting that audience through its ... Read More