Writing about the recent events surrounding Park National Bank and its parent, FBOP Corp., Dale Sorenson says that the Federal Deposit Insurance Corporation “is obligated to decide how to dispose of a failing bank without reference to the non-banking virtues of its owner.” [FDIC acted appropriately in closing FBOP, Viewpoints, Dec. 2] He goes on to imply that those of us in the Coalition to Save Community Banking, who oppose the shut down of FBOP and the acquisition of its assets by U.S. Bank, want the FDIC to change the rules on the grounds that the owner of FBOP is a “good person.” That, of course, is not the case.
He also argues that U.S. Bank deserves to acquire FBOP at a discount to actual value because it behaved “prudently” during the current financial crisis. Neither of these claims is true. The coalition does, however, want a level playing field in which large national banks and smaller community banks are treated equally. That is not the case in this action by the FDIC.
Banks are judged both by the soundness of their banking decisions and by their impact on communities. They are not just fly-by-night visitors; they are also crucial institutions. From this perspective, the contrast between U.S. Bank and Park National is stark. Many banks are reluctant to locate and loan in poorer or minority neighborhoods. But Park National has bucked this trend. Its ratio of lending to minorities compared to lending to white mortgage holders last year in the Chicago area was 2.5-to-1, according to the Woodstock Institute. In sharp contrast, U.S. Bank’s ratio was 0.4-to-1. The coalition believes that U.S. Bank needs to drastically revise its lending practices if it is to adequately serve this community. For this reason, the coalition will be seeking a legally binding agreement with U.S. Bank to ensure that community services and investment remain strong.
Sorenson also claims that U.S. Bank was “prudent” and deserves to benefit from the current crisis by acquiring less prudent banks. This is simply not true. U.S. Bank’s nonperforming assets quadrupled between 2008 and 2009. As a result, it took $6.6 billion in TARP (Troubled Asset Relief Program) money – that’s money that you and I paid to the federal government. Yes, they paid it back, but why did they get TARP money and not FBOP Corp.? Sorenson asks for a double standard: bail out the big banks and shut down the community banks that make their money by serving our needs.
This is the larger, crucial issue in the takeover of Park National. If there is one thing that we must learn from the “Great Recession,” it is that we can no longer afford banks that are “too big to fail” because they threaten the entire financial system. U.S. Bank seeks to become such a bank – they have consistently used the current financial crisis to increase their size and market share, seeking not to further the constructive role of banks, but rather the “grab all I can get now” approach to banking.
So what does the coalition want? Our demands are modest. We ask Rep. Luis Gutierrez, who chairs the House Subcommittee on Financial Institutions and Consumer Credit, to hold congressional hearings around the Park National Bank situation in particular, and the fate of community banking in general. These hearings should reveal the decision-making process – and who made the decisions – in this takeover of a community bank that, on the very day the FDIC acted, received an award from the U.S. Treasury Department for its investment in community revitalization projects. Looks like Treasury got it right and the FDIC got it wrong.
Bill Barclay and Peg Strobel are Oak Park residents and members of the Oak Park Coalition for Truth and Justice and the Coalition to Save Community Banking.