Customers at banks across the country are nervous these days because of the July 14 federal takeover of IndyMac Bank in California. IndyMac is the second largest financial institution to fail and is now being managed by the Federal Deposit Insurance Corpo
Customers at banks across the country are nervous these days because of the July 14 federal takeover of IndyMac Bank in California.
IndyMac is the second largest financial institution to fail and is now being managed by the Federal Deposit Insurance Corporation.
But business at Chicago’s four Black-owned banks remains upbeat despite the IndyMac debacle, record foreclosures and a dwindling job market.
“I disagree with anyone who says the banking industry is in a downturn,” said Walter Grady, president and CEO of Seaway Bank and Trust Co. “The banking industry is strong, and Black banks are thriving here in Chicago and elsewhere. And even though a lot of banks are involved in sub prime loans, Seaway does not do sub prime loans. If we cannot get you qualified for a conventional loan, then we deny your loan request.”
Seaway, headquartered at 645 E. 87th St., is Chicago’s largest Blackowned bank with $350 million in assets.
Grady added that Seaway currently has a $40 million mortgage portfolio and advises anyone renting to continue renting if they cannot get a conventional loan such as one with a fixed interest rate.
“You know you cannot afford a $1,200 monthly mortgage if you’re making $200 a week,” Grady said.
“What has happened is that a lot of first time Black home buyers have been misled to think they only can qualify for a sub prime loan when that is not always the case.”
Economists say that the current foreclosure crisis, caused largely by sub prime lending, is crippling some financial institutions such as banks that offer those types of non-conventional loans.
But at Illinois Service Federal, a Black-owned bank at 4619 S.King Drive, no sub prime loans are offered. Still, many of its customers have been calling daily to get reassurance that their money is safe.
“Our customers have been calling us asking is everything all right with their money,” said Norman Williams, CEO of Illinois Service Federal. “We tell them that one of the worst things they can do is take their money out of the bank.”
Illinois Service Federal has $120 million in assets and a mortgage loan portfolio equal to Seaway at $40 million. And like Seaway, ISF will decline a loan request if the customer does not qualify for a conventional one.
Banking analysts estimate the IndyMac takeover would cost taxpayers between $4 billion and $8 billion.
In 1984, the FDIC took over the now-defunct Continental Illinois National Bank in Chicago, which had $40 billion in assets, making it the nation’s largest bank takeover.
Banking customers said the IndyMac situation has them up at night.
“I just hope when I go to the ATM I can get my money out and not get surprised,” said Cheryl McBride, 36, who has a checking and savings account at Highland Community Bank, another Black-owned bank in the city.
“Personally, I think account holders should not be stuck holding the bag if a bank fails. Customers have nothing to do with that,” she said.
Larry Bowen, 67, banks at Illinois Service Federal and said he is more concerned about his Individual Retirement Account than anything else.
“Without it, my wife and I cannot survive because that is our sole source of income,” he said. “If I have to, I will close our account and start keeping our money at home under the mattress.”
Sheila Bair, chair of the FDIC, said bank accounts up to $100,000 are protected by her agency. Retirement accounts, such as IRAs, are insured up to $250,000.
“I won’t say that banks don’t have challenges right now … they do,” Bair told the Defender.
Still, she said, the banking industry is safe, and customers should not panic.
“The IndyMac Bank closing is just one of five bank closings this year. There are 8,500 banks,” she said.
Bair added that in the FDIC’s 75- year history, no customer with an FDIC-insured bank account has ever lost a penny.
Besides Seaway, ISF and Highland Community Bank, 1701 W. 87th St., the city’s other Black-owned bank is Covenant Bank (formerly Community Bank of Lawndale), 1111 S. Homan St.
Dennis Irvin, CEO of Highland Community Bank, and Herman Davis, president of Covenant Bank, were unavailable for comment.
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