• Lisa Simpson
• Jun 29,2010
• In: Foreclosure

Local Banks Have been Allowed to Collapse

Only mega banks have been bailed out of trouble but local banks like Park National Bank of Chicago, have been allowed to collapse despite their rapport with local communities and efforts to develop them.

Park National Bank and its umbrella organization was taken over by the fifth largest bank of America US Bank but it has not been able to endear itself to the local community despite promises of continuing with the good works of the Park National Bank. US Bank is being accused of lack of transparency but the bank contends that it cannot share all the details with the activists of the community.

The coalition members have been critical about US Bank for its policy of hands-off in matters relating to foreclosures. But the situation for the bank is awkward considering the mortgage market framework. The individual housing loans were packaged into bonds quite some time ago. These were then sold to the investors theoretically to bring down the risk exposure of the investors to losses in the mortgage market. It enabled banks to contract more mortgages.

Neither of the two banks – Park National nor US Bank had originated mortgages in this Maywood region in the suburbs of Chicago. The latter bank is a trustee of the bonds including the mortgages. As trustees they do not have the right to change the contract of the mortgages. But this has not satisfied critics who think the bank is just passing on the responsibility.

Recently protest rallies against US Bank were staged in Oak Park neighbourhood in front of an apartment building that was lying vacant in Austin. The apartment was in a sorry state with leaking pipes and birthday streamers mingling with feces of stray dogs completing the picture of sad socio-economic decay. An octogenarian next door neighbour complained that she could hear barking dogs at night coming from the building and see the tall grass choking the yard in the morning.

US Bank claims they had contacted Wells Fargo the originator of the mortgage on that particular building and urged them to beef up security and maintenance measures. The bank officials were upset that they were being focused upon for a national problem for which neither them nor Park National Bank was responsible.  It was frustrating for them to be asked to do the cleaning up of the mistakes done by others.

In Chicago US Bank does have some friends – two institutions that were fortunate enough to continue to get help from US Bank that had been promised by Park National Bank.

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