| 02 November 2009
From trying to obtain home mortgages to personal loans, Dan Arce isn’t unlike the thousands of other customers who have turned to Second Federal Savings for financial aid and services for his family through the years.
Second Federal has become a part of Chicago’s Little Village neighborhood as much as the street vendors who sell those refreshing paletas on hot summer days along 26th Street. In fact, Second Federal has been a fixture in the community long before Mexican immigrants began arriving to the neighborhood in the late 1960s.
Second Federal began as a “building and loan” back in 1882, an old-time phrase that brings back memories of the bank in the holiday classic “It’s a Wonderful Life.” In its early years, Second Federal served more Eastern Europeans. As the decades went on and Mexican immigrants began moving in, Second Federal didn’t hesitate to serve the needs of this growing community.
“The bank is really vital to the community,” says Arce, owner of Tropical Optical and board member of the Little Village Chamber of Commerce. “They’ve helped a lot of people who wouldn’t be able to get loans anywhere else.”
Second Federal is known as a thrift bank in which depositors are the bank's owners. It does not have stock nor is it publicly traded.
In recent years, Second Federal garnered national attention as the first bank in Chicago to provide mortgages to undocumented workers. Clients who are in the crosshairs of the U.S. immigration debate make up about a third of Second Federal’s client base.
With the recent collapse of the American banking industry, new rules are forcing the bank to increase deposits and avoid risky loans.
“What’s happening at Second Federal right now is we’re facing an unprecedented number of foreclosures. I mean, we’ve never experienced this in the past,” says Mark Doyle, vice president of community development at Second Federal (left). “The biggest problem that we’re seeing in our community is that real estate values are tanking.”
Rising foreclosures and sinking property values aren’t unique to Chicago. It’s happening all over the country, most notably in Nevada and Florida.
Several large banks have faced huge losses, even greater than Second Federal. But those “too big to fail” banks were able to secure cash from the federal government in a program known as the Troubled Asset Relief Fund. Some banks just blocks away from Second Federal got relief from TARP – but not Second Federal.
“The FDIC (Federal Deposit Insurance Corporation) is telling us they won’t give (TARP funds) to community banks like ours because we’re a thrift and we’re not too big to fail,” Doyle says.
U.S. Treasury Department spokeswoman Meg Reilly says the Obama administration's Financial Stability Plan is serving minority-owned banks in several ways. “The Public Private Investment program encourages program participation by small minority- and women-owned businesses. The Capital Purchase Program includes many small minority- and women-owned participants as well,” Reilly says. “You will also find numerous Hispanic, African-American, women, disabled and tribal organization recipients of Recovery Act funds.”
Of the more than 8,300 banks in the United States, less than 330 are considered minority- or women-owned, according to Creative Investment Research, an organization that keeps track of minority banks. Moreover, of the $700 billion in the TARP program, about 1 percent has gone to minority-owned banks, including Banco Popular, according to Bill Cunningham of Washington-based Creative Investment Research.
“We think that’s low, especially given the track record that these institutions have in reaching out and serving the community in a responsible manner,” Cunningham said in a recent interview with National Public Radio.
NEW OBSTACLES
Second Federal faces a number of hurdles if its wants to continue operating. In the spring, the U.S. Office of Thrift Supervision placed a cease and desist order against the bank.
“It puts controls over what we can and cannot do,” Doyle says. “We have some restrictions on lending, but most banks have restrictions on lending right now. We are running business as usual.”
But the order by the OTS requires Second Federal to come up with a liquidity plan, have qualified senior executives, improve its loan collection efforts and establish a capital plan.
Another way Second Federal is trying to find assistance is through the FDIC’s Minority Deposit Institutions program. In essence, the bank, despite its long history of serving a majority-minority community, is attempting to be designated officially a “minority/Hispanic-owned” financial institution.
Doyle says if Second Federal obtains MDI designation, it would help the bank’s bottom line by having access to global financial institutions and could possibly help the bank obtain TARP funds.
“Businesses, people, not-for-profit organizations can invest in the bank in terms of equity ownership. We would get government agency deposits, non-withdrawable deposits. There’s technical assistance to protect against insolvency. The list goes on and on,” he says.
There are two main requirements for the bank to achieve this designation. The first is that it must serve a minority community. This requirement won’t pose much of a problem for the bank to meet, Doyle says.
The second requirement could prove fatal to Second Federal because of internal struggles within the bank’s seven-member board of directors, of which only two are Latino. The bank must expand its board and bring on new Latinos, or it will likely not receive MDI designation. So far, there has been some pushback by those on the bank’s board of directors to bring on more Hispanics to its ranks.
Board president Connie Lara did not return several phone calls made to her office seeking comment.
That mindset baffles longtime customers and business owners like Dan Arce, who was surprised to learn of the lack of Latino board members at Second Federal. Community and business leaders like Arce have demanded meetings with Second Federal’s board of directors, but so far those efforts have been thwarted.
“We’re starting an uproar. A lot of people are behind this and everyone is going to be watching,” he says.
Arce says Little Village needs a bank that looks more like the community it serves, in an effort to be more responsible or risk being left behind just like any other bank that calls 26th Street home these days.
In Illinois, there are 15 banks with MDI status, mostly in the Chicagoland area. Of those, 11 are Asian-owned banks and four are African-American-owned banks.
To business leader Francisco Menchaca, those numbers are startling since Latinos represent 16 percent of the population in Illinois. Yet with 4 percent of the population, Asians own 75 percent of the MDI banks.
This is why Menchaca, a board member of the Little Village Chamber of Commerce, feels it is imperative for Second Federal to allow the expansion of its board and include more Latinos. “We have a very unique and beautiful opportunity for continued growth as a community,” Menchaca says. “This (MDI) designation is important for us right now.”
Menchaca says continued discussions with Second Federal are progressing in the right direction and he’s confident a solution is in the works.
The FDIC could make its ruling on whether to grant Second Federal MDI designation by late fall.
Doyle says the bank’s bylaws will need to be revised to expand the board. Any revisions would have to be reviewed during the bank’s annual meeting in December. Doyle, who is also a member of the board, hopes the rest of the board will realize the importance of obtaining MDI designation, and that it will only happen if the board expands to include the very people Second Federal has come to serve.
“I believe (MDI) will save us from the terrible economy that we’re in. We’re going to need capital,” Doyle says. “Having member(s) of the community representing this bank makes us an attractive investment for people here and even globally.”
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written by bankster assasin, November 11, 2009
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written by Scott A. Rosenbaum, November 04, 2009
I was privileged to do business with Second Federal Savings for more than ten years specifically serving the Mexican community of Little Village and surrounding areas in the business of foreign money remittances. I also served other Mexican communities throughout the entire United States. Clearly, to me, Little Village is distinguished as one of the foremost Mexican communities in America and members of this community know that Second Federal is as much a part of their community as any one business or institution in town.
This community owes a lot to the constant and continued efforts of Second Federal and they know it.
Now is the time for the community to band together to lobby and influence the Board of Directors of Second Federal to take the steps necessary to preserve the services that have provided wealth and assistance to the community and its individuals for so many long and trying years. It is important that influential individuals and businesses in Little Village and surrounding communities see to it, to the full extent of their collective power, that a Latino majority exists on the Board of Directors of Second Federal Savings.
Who are the necessary people and organizations that must do this? Time is of the essence. The community at large must now endeavor to save the institution that has fostered business and prosperity so well for so long in their neighborhoods. Or, indeed, it will cease to exist as they have come to expect and rely on for so many good years.
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