West Side community leaders and residents are still reeling over last week’s stunning announcement that the Federal Deposit Insurance Corp. had seized the nine banks of FBOP Corp.
First Bank of Oak Park, owned by Michael Kelly, which includes Oak Park-based Park National Bank among its branches, had for years been a source of community investment in Austin and Oak Park.
On Nov. 9, Bob Vondrasek, executive director of South Austin Coalition Community Council, and many other community leaders, including Rev. Ira Acree, pastor of Greater St. John Bible Church, gathered in front of Park National at Austin and Madison to protest the FDIC’s takeover. The group was requesting that Congress investigate the closing of the bank.
So passionate were protesters that at one point they decorated the front of the bank with yellow police tape, signifying their belief that both Kelly and the community had been robbed.
“Well, the police came and made us take it down, but that was what we were feeling,” said Acree. “We have contacted the office of [U.S. Rep.] Bobby Rush requesting that he meet with us to discuss whether this takeover was properly carried out. If it was not, we want to assure that Mr. Kelly receives a fair hearing and has the opportunity to reacquire the bank.”
The timing for the takeover seemed stunningly malapropos to some, as it occurred on the same day that the bank was approved for $50 million in federal funds by Treasury Secretary Timothy Giethner. The money was for stimulative reinvestment projects like a charter school and wellness center for the West Side.
“I think this is a sad day for everyone on the West Side,” said Vondrasek. “It was a model for all community banks. It invested in churches, invested $22 million in Christ the King Jesuit College Prep School and offered the school’s students internships, it even offered the South Austin Coalition Community Council a loan when we were going through a rough stretch.”
The FDIC has since sold the bank to U.S. Bank, which, according to some, including Acree, serves corporate rather than community interests.
“If there was no impropriety, we want to assure that U.S. Bank will serve the needs of the community and not just their corporate affiliates,” said Acree, who, depending on the outcome of the seizure, wants to meet with Park National’s new owners.
There were two primary factors that caused the fall of First Bank of Oak Park Corp.
The first was a failed $855 million investment into Fannie Mae and Freddie Mac preferred stock by Kelly that became worthless once the infamous company crashed last year. The second is the insolvency of two of the banks in California and Texas.
Under Kelly’s “cross guarantee mechanism agreement” with the FDIC, each of his banks, even healthy ones like Park National, would be seized while controlled by the same owner if there are under-capitalized branches under the company umbrella.
Federal Bank of Oak Park was unable to pay the debts owed by the struggling banks and that was the company’s ultimate undoing.
Nonetheless, Virgil Crawford, director of community organizing for Westside Health Authority, is also troubled by the FDIC’s handling of the bank. Crawford noted that the cross guarantee mechanism hasn’t been used to seize a bank since the savings and loans crisis 20 years ago.
“There’s no doubt in my mind that Park National got a raw deal,” said Crawford. “It received none of the concern that the bigger banks were given, it was not offered any TARP funds to help it back on its feet like Chase or Citigroup or all the other profit driven banks that the government deems ‘too big to fail.’ It was simply shown the door.
“The result of Park National Bank’s demise,” he added, “could have a chilling effect on the economic standing of the West Side.”
Crawford said he is working with Acree and Vondrasek to encourage local congressmen to call a hearing about the matter within the next month.