Running a bank on the West Side of Chicago is not easy. Attempting to build success off the foundation of a long-troubled bank is hard. And doing all this as the worst banking crisis in 80 years came crashing down on banks small and large was finally impossible.
That’s the story of Covenant Bank, the long held dream of Forest Park Pastor Bill Winston. In a life of spiritual and financial successes – building Living Word, the mega-Christian Church, buying and resuscitating the Forest Park Mall – the government shutdown of Covenant Bank and with it the loss of his own and his small shareholders investments is a bitter failure.
We respect the goals and the efforts Winston put into Covenant Bank. Tough neighborhoods like Lawndale need banks if they are to stabilize. They need real estate lending for two-flats and 20-unit apartment houses. They need to provide alternatives to the scourge of pay-day lenders (too often big banks cloaked in other garb).
But those banks in poor communities also need to work as business enterprises. Those banks need to find a path through the increasing thicket of bank regulators – a necessary result of the greed and lax oversight which nearly brought down the whole economy. The reality then is that all banks, and Covenant was a very small bank, need professional bank management. And here is where Winston let his very small shareholders – many of them church members – down. The bank did not have the level of management necessary to overcome the many, many challenges it faced. It did not have enough banking talent on its board to provide guidance.
Federal regulators were rightly on the case at Covenant Bank almost from its first day. There were multiple and fair warnings of corrective action necessary. For his part Winston responded in some areas as he bought back shares and added personal and corporate capital to shore up the bank. But it wasn’t enough and where he needed to reach out for professional help he was slow to respond.
It’s not right but it is reality that in the aftermath of the big bank debacle, all the too-big-to-fail rhetoric, that it is the biggest banks which have grown still bigger during recent years. It is community banks, the banks closest to the neighborhoods, which have most often failed and which still struggle. And that gives us all something to ponder.