* GE joins effort to save Chicago community bank
* ShoreBank wins backing from Wall Street banks -sources
* Experts say ShoreBank's philanthropy drew investors
(Revises first sentence, adds comments by analysts, other
background, adds CHICAGO to dateline)
By Kyle Peterson and Scott Malone
CHICAGO/BOSTON, May 18 A troubled Chicago
community bank with a philanthropic reputation has won uncommon
Wall Street backing to save it from a government takeover,
while similarly sized rivals flounder and fail.
Privately owned ShoreBank, a community development lender
on Chicago's South Side near the home base of President Barack
Obama and some of his top aides, is getting assistance from a
consortium of Wall Street banks including Goldman Sachs Group
Inc (GS.N), Citigroup (C.N), JPMorgan (JPM.N) and Bank of
America (BAC.N), sources have said.
Spokesmen for Citigroup and General Electric Co (GE.N) each
confirmed $20 million investments on Tuesday, and JP Morgan
previously said it was ready to inject $15 million. Another
source said Goldman injected $20 million.
ShoreBank, which has $2.3 billion in assets, was reported
to have exceeded the $125 million in rescue capital it needed
to avoid a takeover by the Federal Deposit Insurance Corp.
A ShoreBank spokesman declined to comment on specific
investments, saying only that capital-raising efforts so far
had been "encouraging."
Small banks across the nation are failing at a rapid pace
due to troubled real estate loan portfolios, but ShoreBank's
dedication to community development and environmental causes
apparently secured its special status.
"I think this is a very unique circumstance. But ShoreBank
is kind of a unique institution in that regard," said Geoff
Smith, senior vice president at the Woodstock Institute, which
studies lending in poor communities.
"When you think of other banks, they don't usually get
bailed out in this manner," he said.
Smith and others say ShoreBank's philanthropic reputation
-- it traditionally provided loans for small residential
renovation projects in impoverished areas -- and its Washington
ties may have saved it from a fate suffered by other banks.
So far this year, the FDIC has seized 72 banks, several of
them in Illinois. Among those taken over was Chicago's Broadway
Bank, which was owned by the family of Illinois Treasurer Alexi
Giannoulias, a Democrat running for Obama's old U.S. Senate
Among ShoreBank's champions are former U.S. comptroller of
the currency Eugene Ludwig and Ellen Seidman, a former head of
the Office of Thrift Supervision.
U.S. Rep. Jan Schakowsky, who represents Chicago's North
Side, has lobbied the big banks to "leave no stone unturned" in
saving 34-year-old ShoreBank. She blamed Wall Street's
"recklessness" for the foreclosure crisis that precipitated
ShoreBank's losses, which were $53.6 million in 2009.
Bill Brandt, chairman of the Illinois Finance Authority,
said there had been no political arm-twisting to win
investments for ShoreBank. He said Wall Street banks were happy
for a chance to align themselves with a community bank that has
a national reputation for philanthropic investments.
"People were fighting to get into this deal, as odd as that
sounds," Brandt said. "Many of these organizations are aware
they are under public scrutiny and they take a philanthropic
vision to improve communities very seriously. The White House
had nothing to do with this."
Goldman 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.
(Additional reporting by James Kelleher and Andrew Stern in
Chicago and Karey Wutkowski in Washington, editing by Matthew