Rolfe Winkler

“The bank is said to be involved in lending in poor communities…” Sheesh! Let’s get a grip on our scepticism, shall we? I know Goldman is now the incarnation of cynical evil, but this isn’t about Chicago or presidential politics. ShoreBank is an international icon in the fields of innovative community investment and developing effective for-profit ways to deliver financial services to the poor in developed economies. Its move into “green” business is very much part of its core mission, since it sees “green” business as an area of future growth that offers economic opportunities for its customer base. ShoreBank is sort of like Grameen in the microfinance field — you know, the organization and guy who won the Nobel prize? People around the world have been studying and learning from ShoreBank’s experiences for decades.

It’s a shame, but inevitable, that if their customer base gets decimated by the Great Recession, their business is going to take a big hit. If as the article you linked to represents, Goldman (and other Wall Street banks) has committed to spending millions on do-gooding — improving financial services to the underserved sectors of the economy — helping an institution with a decades-long track record to survive is an extremely good use of its money. I’m not in the least surprised that, when an FDIC take-over finally appeared inevitable, the big boys in the US financial sector decided to rally around.

Sorry you got confused by the Grameen reference — I was talking about their international stature, not their lending methodology. My point was simply that ShoreBank has an international stature, like Grameen’s, such that it requires no “political influence” hypothesis to explain why folks like Goldman would step up when ShoreBank got in trouble. ShoreBank’s management can get their calls returned by all the Masters of the Universe. The pols may have picked up the phone to encourage support, but it wouldn’t be required.

Yes, Grameen is (IMHO overly) dependent on free donor funds. However, you are mistaken about ShoreBank, which is a different kettle of fish entirely. First, it is not a “charity”. It operates essentially as a for-profit, although it is not a profit maximizer for its shareholders. The necessity to make a profit is in effect a “constraint” on their business model. They manage their business to generate enough earnings to generate a reliable return on their borrowed funds and have enough equity to meet FDIC insurance requirements. It’s that model — a community bank that can efficiently deliver services to a poorer sector of a community but meet the regulatory requirements for commercial banks — that has been so intriguing for banking regulators in other countries who want to expand both lending and savings services to the less affluent who currently have little or no access to financial services.

The problem ShoreBank is facing now is the concentration of their business, geographically and socio-economic, that’s taken an unusually large beating in the Great Recession. In that, they’re certainly not alone. It’s a problem being faced by other community banks that aren’t geographically diversified and operate in badly hit areas, even if those banks didn’t focus on the poorer members of their community. And btw, a “green” focus doesn’t necessarily imply NPLs. Frex, there’s an increasingly good business in local, low-tech efficiency conversions, and programs like Cash for Caulkers will create more demand for local small businesses to meet. AFIK, that’s the sort of “green” that ShoreBank finances. It’s not like ShoreBank is a “green tech” VC.