Carver Bancorp’s shareholders confronted a painful choice on Tuesday. They could vote to cede control of the Harlem-based institution to a consortium of Wall Street firms and the U.S. government in return for $55 million of cash to rescue their ailing bank. Turning the money down would likely have doomed Carver Federal Savings, the nation’s largest bank founded and run by African Americans.
In the end, the shareholders voted to approve the rescue package–but not without first voicing considerable anguish over the options they faced. “This represents a significant shift from community ownership to corporate,” said an investor who identified herself as Wimberly Edwards. “What’s our future with all the outsiders whose interests may be different from ours?”
Carver Bancorp CEO Deborah Wright tried to assure the audience at Harlem’s Studio Museum that Goldman Sachs Group Inc., Morgan Stanley, Citigroup and the other new owners are “keenly attuned to our mission” and “wouldn’t have stepped up” if they didn’t think Carver was worth preserving.
“I understand the optics,” Ms. Wright said in an interview after the shareholder meeting. “But there was no alternative. The amount of capital we needed wasn’t available locally.”
Carver’s clients, who generally live and work in the city’s poorer precincts, have been hit especially hard by the recession. The bank posted a $40 million loss last year, more than wiping out the prior decade’s worth of profits, as seriously delinquent real-estate related loans soared to about $120 million–well in excess of Carver’s $23 million set aside in reserves.
In February, federal regulators ordered the bank to raise additional capital. Ms. Wright, a former Giuliani administration housing official who sits on such powerful boards as the Partnership for New York City and Time Warner, began searching far and wide for money.
In June, she announced she’d been able to raise $55 million, mainly from the city’s biggest banks, while the U.S. government agreed to convert into common stock a preferred stake it got upon bailing out Carver two years ago during the financial crisis.
Source: Crains New York | Aaron Elstein
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