Chicago’s ShoreBank and the Rise of Socially Responsible Banking

By: Kristin Moo (BMRC Processing Intern)

The financial industry has been getting a bad rap lately. A recent $25 billion settlement between the U.S. government and the country’s largest mortgage servicers is a testament to systemic problems with banking practices throughout the financial crisis beginning in 2008. Last year, the Pew Research Center found that 47% of Americans believe Wall Street hurts the economy more than it helps. So it might be difficult today to imagine a thread of altruism driving the development of a global banking network.

Then Arkansas First Lady Hillary Clinton was a founding board member of the Southern Development Bancorporation, an affiliate of ShoreBank. Her hand-signed resignation letter is part of the ShoreBank Corporation records.

But leafing through the ShoreBank Corporation Records reveals the history of a groundbreaking institution founded with a primary mission beyond its own financial growth. In the early 1970s, four bankers teamed up to envision a bank that went out of its way to serve populations that traditional banks typically avoided. It was less than a decade after the Reverend Dr. Martin Luther King, Jr. moved into Chicago’s west side to promote fair housing in this historically segregated city. The practice of redlining lingered and the term “white flight” applied not just to south- and west-side residents moving to the suburbs, but also to businesses that saw no future in serving the African Americans who were moving in.

Indeed, it was around that time that the South Shore National Bank in Chicago’s South Shore neighborhood began planning to relocate. In 1972, bank officials submitted an application for relocation to the Federal Reserve Bank, noting: “In recent years, there has been an adverse change in the residential and business characteristics of the trading area,” and “…the bank’s clientele have been leaving the neighborhood and the per capita income of the people moving in is decidedly lower.” But for Ron Grzywinski, Mary Haughton, James Fletcher, and Milton Davis, the changing neighborhood was more of an opportunity to spur growth than a financial liability.

This small cadre of black and white bankers raised the capital necessary to buy South Shore National Bank (renamed ShoreBank in 2000) and keep it in the community, where they actively sought to lend to African-American residents and small business owners. Their concept combined the roles of commercial banking and nonprofit community development, proving that it is possible to turn a profit without abandoning social responsibility. By ShoreBank’s own expansion as well as consultation with stakeholders in other communities, its influence circled the globe. Community development banks arose from Detroit and Cleveland to rural Arkansas, the Pacific Northwest, and beyond to Eastern Europe and Bangladesh.

The ShoreBank Corporation records at the University of Illinois at Chicago tell the story of the company’s rise and its influence, particularly on Chicago’s South and West sides. From Ron Grzywinski’s early notes scrawled on sheets torn from a legal pad to binders packed with budgets and strategic plans, the collection reveals motivation for both social and fiscal growth. By the mid-2000s, observers say, efforts to achieve the latter goal may have undermined ShoreBank’s overall stability. With the financial collapse 2008, ShoreBank suffered along with banks around the world, and in 2010 federal regulators forced its closure. But as for its influence on global finance, ShoreBank lives on.