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Monday Links: A Lifeline for ShoreBank

Posted by: John Tozzi on May 17, 2010

Wall Street banks including Goldman Sachs, Bank of America, Citi, JPMorgan Chase, and Morgan Stanley are in talks to help save ShoreBank, a pioneering community lender in Chicago facing closure by regulators, reports the WSJ’s Elizabeth Williamson:

ShoreBank’s lending programs for small businesses in low-income neighborhoods and its international micro-lending programs have garnered acclaim from President Obama and former President Bill Clinton.

Losses racked up during the recession have left the bank facing a demand to raise new capital or face likely closure by regulators. ShoreBank’s [spokesman Brian] Berg said the bank wasn’t involved in subprime mortgage lending, the type of loans made to borrowers that helped touch off the credit crunch and financial crisis. The bank suffered losses on loans to businesses that served low- and middle-income communities hit hard by the recession and unemployment.

Bloomberg’s Rich Miller looks at the uneven recovery. Key quote:

“It’s not just about Wall Street vs. Main Street,” said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., the Newport Beach, California-based manager of the world’s largest bond fund. “It’s about large companies versus small companies and wealthy households versus those less well off.”

Some more on this from Steve King. This dynamic hasn’t really changed since six months ago.

Analyst Meredith Whitney, in a WSJ op-ed, explains why — and says some proposed regulations may worsen the problem:

Small businesses fund themselves exactly the way consumers do, with credit cards and home equity lines. Over the past two years, more than $1.5 trillion in credit-card lines have been cut, and those cuts are increasing by the day. Due to dramatic declines in home values, home-equity lines as a funding option are effectively off the table. Proposed regulatory reform—specifically interest-rate caps and interchange fees—will merely exacerbate the cycle of credit contraction plaguing small businesses.

And Felix Salmon, not buying it, responds.

The NFIB has joined a lawsuit by states challenging whether health care reform’s requirements for everyone to buy insurance is constitutional, Donna Smith reports at Reuters.

And check out this graphic from Inc. on top business incubators.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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