A sad day

(Revised Saturday 8/21/2010, with five additional paragraphs.)

When I first moved to Washington in September 1987 it was a cheaper place to live (somewhat), and nonprofit jobs paid less than $20,000 starting out, and the city was rough, and two of the cooler institutions on Dupont Circle were Kramerbooks & Afterwords Cafe, still around, and the bookstore Common Concerns, which is not.

Common Concerns was a progressive bookstore carrying titles on a variety of issues, including urban studies, and I used to buy a number of books, even though I wasn't an involved citizen or working in urban revitalization then, I still followed the issues, living in DC, a city (of a sort), and having lived as a child in Detroit, witnessing and living white flight and exurban development, etc.

I remember buying and reading and being impressed by a book--it was probably Community capitalism by Richard Taub--on the Shore Bank, which was still a new fangled creation in the 1980s, although the bank was founded in 1973--a community-oriented, community-reinvestment focused bank. It was purchased by people experienced in banking, it was located in a declining area, and they decided to refocus the bank's investment policy on improving the community, through capitalism.

It worked, and a number of other people wrote about the bank's activities, which were heralded nationally. City First Bank in DC is based on the Shorebank model.

But the Chicago Sun-Times reports, in "Federal regulators seize ShoreBank," that the bank has failed, taken over by federal regulators, and sold to others, who will reopen the bank as "Urban Partnership Bank." Fortunately, the new owners intend to keep the focus on community capitalism. (Image by Scott Stewart of the Chicago Sun-Times.)

The problem with being on the edge, an outlier within an industry, is that your business model tends to be more susceptible to downturns. I don't know if that was their problem, but it is a sad day nonetheless, for community capitalism, for banks trying to do the right thing in the face of an industry model that is focused on churn, deals, and investment banking--Wall Street so to speak, rather than Main Street.

Not to mention that to some conservative interests, community banking is seen as another plot to destroy the world. See the variety of articles from Conservative Blogwatch on the Shore Bank as an example of this.

The people who bought the bank in 1973 were bankers, but bankers committed to not do redlining--or declining to make loans in particular areas, based on race and other factors--in African-American dominated neighborhoods in Chicago.

In Death and Life of Great American Cities, there is a section where Jacobs writes about redlining--it wasn't called that then--how banks stopped making loans in the cities and instead focused on the suburbs, and the impact on the cities. And she contrasted this with her observations of one urban community that remained healthy with a thriving commercial district. She attributed this to the continued presence of a locally-founded and owned bank that remained headquartered in that sector of the city, with the bank's future success on the line, dependent on the economic health of the neighborhood it was based in, the bank had to keep making loans there.

As I always ask when I meet with college students working on projects, "What is the solution to disinvestment?"

In a meeting with two students from Xavier University of Cincinnati earlier in the week--they are working on revitalization planning in advance of the creation of a streetcar line there, which would serve the Over the Rhine neighborhood, a disinvested but historic and well located neighborhood within walking distance to downtown--they got the answer right, immediately, responding:

"Investment."

That's why the Shore Bank example is important. Neighborhood and urban revitalization is all about continued access to capital, about the continued ability to invest in our neighborhoods and in neighborhood-located businesses, and in industries located within cities.