UPDATE 2-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 risks seizure
(Rewrites first sentence, adds no comment from Bank of
America, adds background on bank seizures)

By Karey Wutkowski and Steve Eder

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

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

ShoreBank is just one of hundreds of small U.S. banks
dealing with distressed loan portfolios. But it has built
strong political ties, largely because of the national
recognition it has received over the years for its efforts to
extend loans to low-income communities and environmental

The bank, whose website even boasts of a connection to
President Barack Obama, and its plight have become a positive
publicity opportunity for Wall Street banks facing increased
scrutiny over their role in the recent financial crisis.

“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.

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.

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 ShoreBank.

Goldman Sachs, Citigroup, Bank of America and JPMorgan
declined to 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
obtain enough commitments on Friday to get the full amount
required, the source said, speaking anonymously because of the
sensitivity of the matter.

It is unclear how quickly the Federal Deposit Insurance
Corp could take the bank into receivership if it does not come
up with a recapitalization plan that satisfies regulators.

The FDIC typically announces the seizure of banks on Friday
evenings, but regulators will hold off on seizures if there is
a viable “white knight” investor.

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

The Wall Street Journal reported that Goldman Sachs Chief
Executive Lloyd Blankfein had discussions with FDIC Chairman
Sheila Bair about helping the bank. The FDIC declined to

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

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.

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

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.

Investing Tools

(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 and Matthew Lewis)

UPDATE 2-Goldman joins effort to rescue Chicago bank