UPDATE 1-Goldman joins effort to rescue Chicago bank

* Goldman agrees to commit $20 million to rescue

* Working with Citi, JPMorgan, Bank of America

* ShoreBank needs to raise $125 mln or risk seizure
(Recasts with new story source; adds comments from Brandt,
ShoreBank spokesman, detail on JPMorgan investment,background)

By Karey Wutkowski and Steve Eder

WASHINGTON/NEW YORK, May 14 (BestGrowthStock) – Goldman Sachs Group
Inc (GS.N: ) Chief Executive Lloyd Blankfein and a consortium of
other top banks are part of an effort to save ShoreBank Corp, a
Chicago bank with Washington ties, a Democratic activist close
to the institution said on Friday.

Goldman, Citigroup (C.N: ), JPMorgan (JPM.N: ) and Bank of
America (BAC.N: ) are helping raise the $125 million the
community development lender needs to avoid a government
takeover, said Bill Brandt, chairman of the Illinois Finance
Authority.

“My understanding is that Goldman Sachs has made a
significant commitment and will act on this commitment today,”
Brandt said. “Whether this deal gets finally cooked is a
Herculean task.”

Brandt said Goldman agreed to contribute more than $20
million to help rescue the bank.

JPMorgan is considering a financing package of about $15
million that would include converting existing debt to equity
as well as a cash investment, a person familiar with the bank’s
plan said. The second-largest U.S. bank is already an investor
in Shore Bank.

Goldman Sachs, Citigroup and JPMorgan declined to comment.
Bank of America did not immediately respond to a request for
comment.

A person familiar with the capital-raising efforts said
ShoreBank is $10 million to $15 million short of the $125
million capital target set by regulators. The bank hopes to get
enough commitments today to get the full amount required, the
source said, speaking anonymously because of the sensitivity of
the matter.

ShoreBank, which has $2.3 billion in assets and is
nationally recognized for its programs to lend to low-income
communities, faces a Monday deadline to show it has met
regulators’ capital demands.

“We’re working expeditiously on our capital raise, and we
appreciate all parties, including a number of banks, who are
supporting us in this effort,” said Brian Berg, a spokesman for
ShoreBank. He declined to name any institutions helping in the
effort.

The Wall Street Journal reported that Blankfein had
discussions with Federal Deposit Insurance Corp Chairman Sheila
Bair about helping the bank. The FDIC declined to comment.

Goldman Sachs has been trying to burnish its image after
confronting political pressures and populist anger over its
quick turnaround and perceived lack of concern over the
economic downturn. Its image was further tarnished last month
when the U.S. Securities and Exchange Commission brought fraud
charges against the firm.

ShoreBank has kept a high profile in the community
development world. It focuses on loans that contribute to
environmental efforts and targets borrowers looking to convert
deteriorated apartment buildings into income-producing
properties, expand small businesses, and upgrade homes and
property.

It was especially hard hit during the recession, reporting
a net operating loss of $53.6 million in 2009. In 2008 it eked
out net operating income of $1.3 million.

The bank has powerful ties to Washington, displaying on its
website a YouTube video of a news report that links ShoreBank
with President Barack Obama when he was a senator.

Helping lead the bank’s capital efforts is prominent
Washington figure Eugene Ludwig, former comptroller of the
currency and now chief executive of Promontory Financial
Group.

Ellen Seidman, a former head of the Office of Thrift
Supervision, serves as executive vice president of national
policy and partnership development at ShoreBank.

Seidman is also a founding council member in Goldman Sachs’
“10,000 Small Businesses” initiative.

Berg was careful to note that no one within ShoreBank has
reached out to anyone in the White House.

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(Reporting by Karey Wutkowski in Washington and Steve Eder and
Emily Flitter in New York; additional reporting by Elinor
Comlay in New York; editing by John Wallace)

UPDATE 1-Goldman joins effort to rescue Chicago bank