Why We Should Care About Park National Bank
In 2009, the Federal Deposit Insurance Corporation (FDIC) announced it was taking over First Bank of Oak Park (FBOP) Corporation, a privately held bank holding company. A few months later, Park National Bank, a community branch of FBOP, was sold by the FDIC to U.S. Bank. Although these types of transactions happen every day in the corporate banking world, it’s important to understand the national implications this has on community banking.
Park National Bank was a staple to both Oak Park and Chicago’s Austin neighborhood. Known as one of the most philanthropic banks in the Chicago area, Park National successfully offered banking services to low-income families and gave them an alternative to payday lenders, currency exchanges and subprime loans. Its accomplishments included bottomless funding for local nonprofits and social service agencies, underwriting costs for new schools, donations to community causes, rehabilitation of countless foreclosed homes that were sold back to residents at affordable rates, a lead role in neighborhood revitalization and economic growth, and countless small dollar loans to help fund local entrepreneurs. For 30 years, Park National Bank provided an infusion of projects, cash, jobs and morale to the community it served.
In 2008, when the government seized Fannie and Freddie Mac, FBOP took a loss of $855 million because of the loans it had underwritten. Initially FBOP was approved for Troubled Asset Relief Program (TARP) funding to help it recapitalize, however, it never received any money because no guidelines for TARP funding of small, privately held banks were ever created. Then Chase bank, which had been lending money to FBOP for years, decided not to extend FBOP’s line of credit and sued them for $246 million.
In 2009, regulators told FBOP that it needed to raise between $500 million and $1 billion to recapitalize. Mike Kelly, the owner of FBOP, raised $600 million just a week shy of the deadline. Nevertheless, federal regulators seized FBOP's nine banks in four states, descended on FBOP’s headquarters, declared it insolvent, and announced its assets were being transferred to U.S. Bank. In a clear case of the right hand not knowing what the left hand was doing, on the very same morning that the FDIC seized Park National’s assets, U.S. Treasury Secretary Timothy Geithner was in Chicago presenting $50 million in federal tax credits to Park National for its community development projects.
Historically, U.S. Bank’s community efforts have paled in comparison to Park National’s. Twenty-eight percent of Park National’s profits went to community causes compared to less than 1% by U.S. Bank. Oak Park’s Wednesday Journal has reported that U.S. Bank already has plans for massive layoffs at FBOP banks, yet claims to be giving notices for “positions” not “people.”
This issue strikes at the heart of Americans' mistrust of corporations and commercial banks. Americans calling for banking reform and bailouts for Main Street have been following the thread about Park National Bank. Public outrage is clear: why aren’t community banks considered as important as large banks to receive federal assistance? In protest, Oak Park and River Forest High School closed two student accounts at U.S. Bank, totaling $300,000, and transferred the funds to the Community Bank of Oak Park River Forest. School representatives say if U.S. Bank hesitates to make the same community commitments Park National made, they will remove their remaining funds. Others are calling for a review of how FBOP was treated by the federal government during the takeover and asking regulators to individually assess each bank’s overall value to the surrounding neighborhood, including its knowledge of the community, as well as its record of commitment to investing and supporting its neighbors.
Since Park National was sold, busloads of Chicago residents traveled to Washington, D.C., to support Mike Kelly as he testified before a House finance subcommittee. Kelly argued that, in the future, the federal government shouldn’t treat other community banks the same way as Park National. New legislation has also been introduced in Congress. Senators Merkley (D-OR) and Boxer (D-CA) have proposed the Bank on Our Communities Act, which would allocate TARP funds to community banks. This bill is currently being reviewed in the Committee on Banking, Housing and Urban Affairs. Although it’s too late for Park National, enactment of this bill will ensure that such a travesty doesn’t happen to other community banks.
For more information contact the Shriver Center’s Community Investment Unit.
This article was co-authored by Susan Ritacca.
This is a great piece. I have personally admired Mr. Kelly and his staff for years. True leadership in community support.
I am truly sad about what happened. But I have direct knowledge that David Daniel, who is still at the bank now under US Bank, was instrumental in
saving a building owner from certain foreclosure by listening to his flight and understanding that each situation, if you put a doze of understanding,
compasion and vision (of course a LOCALIZED understanding of the bank's risk position) can provide both the bank and the individual a win/win
situation. I will never forget that this man, with a decision endorsed by US Bank gave a dejected man his pride, hope and life back. I told the building owner that, had it not been a community bank (well now US Bank)the chances would be null that he would get a break. I understand that Mr. Daniel has worked for Park National for a long time. The building owner is every day working and making improvements in his
building and every time I pass by I almost feel the love and pride the owner has for this piece of real estate,
Mike Kelly stood for honest corp America. He cared about the people and the local business community. We need to go back to that place in time where ethics and morals meant something, not just said with a silver tongue by a world consumed with greed. Mike Kelly is truly a extra ordinary person and hero in my book.