The Wall Street Journal reports on the efforts to save ShoreBank, a Chicago-based bank that is on the verge of being taken over by the FDIC due to bad loans it made. ShoreBank lends to poor communities.
Remarkably, Goldman Sachs, Citigroup, JP Morgan, and Bank of America have tentatively agreed to invest money as part of a $125 million capital raising process to stave off insolvency.
A person involved in the process to save the bank said: "Sometimes a bank like ShoreBank has to rely on karma, and the planets seem to have aligned to provide some karma with respect to this particular deal."
And here I thought that capital raising was about providing attractive returns for shareholders, and not about karma.
In reality, this is about Wall Street firms, facing intense government and PR scrutiny, looking to appease a politically-connected bank and score points with the Obama administration and Democrats.
It takes the phrase "political capital" to a disturbing, new level.
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