HomeTRP NewsTRP's response to FDIC regarding Second Federal Savings

TRP's response to FDIC regarding Second Federal Savings

Published: August 16, 2012
Dear TRP Friends and Supporters,
The Resurrection Project reiterates its extreme disappointment at the Federal Deposit Insurance Corporation’s (FDIC) irresponsible decision to give away family deposits at Second Federal Savings & Loan Association to Wintrust. The statements released by the FDIC on August 14, 2012 are misleading and demonstrate the FDIC’s disregard of its statutory requirement to take reasonable steps to preserve minority banking institutions.
The FDIC claims that it selected Wintrust’s bid over that of community partners The Resurrection Project, Self-Help Credit Union, and One Pacific because it was more “competitive.” Wintrust placed a lower bid of only $100,000. Our bid was over eight times that of Wintrust as we offered a bid for the deposits ($860,000) and another bid for the loans. The FDIC did not release any information indicating that it would accept deposit-only bids. I can only speculate that many more bids would have been submitted if the FDIC released that it was solely evaluating deposit-only bids. The FDIC’s estimated loss is completely subjective because Wintrust didn’t submit a bid for the loans and our community partnership submitted the only bid that they received for the loan portfolio. The FDIC is relying on a theoretical valuation to estimate that Wintrust’s bid was more “competitive.” 
Regardless, The Resurrection Project and our partners believe that submitting a bid for only the SFS deposits and leaving the loans to be put up for auction is simply irresponsible as it puts Latino families who are having trouble paying their mortgages at greater risk of losing their home—further increasing unnecessary foreclosures within the community. It leads to a lack of loan modifications, and those who can pay their mortgages and are used to going to a local bank with cash payments are left with nowhere to go.
The FDIC was misleading when it stated that the bid submitted by The Resurrection Project and its partners was a $130 million discount on Second Federal’s assets. The FDIC had already calculated a $75 million loss with its arrangement with Wintrust; whereas our bid included an additional $28 million loss on the loans in order to right-size them to keep families in their homes.
The FDIC had been a leader on innovative home loan modification programs for failed institutions, and now by breaking apart the loans from the deposits, it has essentially liquidated SFS. Selling the deposits and loans separately amounts to a liquidation of this minority community banking institution. Under this approach, the fate of local homeowners is auctioned off to unknown investors, and the deposits have been literally given away to a wealthy outside bank that we believe has no real intention of using the deposits to make new loans in the community.
The Resurrection Project is still left with several serious questions for the FDIC and Wintrust. Why was a lower bid from Wintrust not disqualified since it did not maximize value as the FDIC alleges that it was looking for or simply because it did not bid on the whole bank? At the very least, the FDIC should have asked for a higher price for the SFS deposits. Will Wintrust consider doing ITIN loans to credit-worthy families in the future or providing community loan products that they will need to portfolio instead of selling them in the secondary market? The FDIC’s decision leaves us wondering what Wintrust knew that other bidders did not.
The Resurrection Project has called upon the FDIC to release to the public any and all records pertaining to the bids filed regarding Second Federal Savings & Loan and the process by which it will ultimately dispose of the loans. Our families—especially those in predominantly Latino neighborhoods like Little Village, Back of the Yards, Cicero, and many more—have an urgent need for this information. It bears upon the future financial stability of the community, as families are unaware of the wrecking ball that may now await them.
Raul Raymundo
CEO, The Resurrection Project