If you knew Mike Kelly only as the secretive billionaire who lost his Oak Park-based banking empire, you might easily lump him in with all the other failed financial wizards now blamed for wrecking the American economy.
But that wouldn’t explain the hue and cry that has erupted on Chicago’s West Side among people from all walks of life — white, black, rich, poor — since regulators seized his nine banks Oct. 30 and handed them over to U.S. Bank in Minneapolis.
Impassioned testimonials in Oak Park’s local paper have called him a hero, the rare financier who funded new schools, low-income housing and countless small businesses in downtrodden places such as Austin and West Garfield through his Park National Bank.
The paper itself decried the takeover, naming him “Villager of the Year.”
The uproar has led to hearings scheduled for Thursday in Washington chaired by Illinois Rep. Luis Gutierrez, where Kelly and regulatory officials will testify about what happened.
The reasons behind the seizure were complex and it’s clear Kelly made some key mistakes. But the anger around Chicago is about a perceived government double standard that ignored the good his banks were doing.
Kelly didn’t traffic in the “toxic” subprime loans or derivatives that toppled the “too-big-to-fail” banks at the heart of the financial meltdown. Yet while the government coddled the big banks with billions in bailouts, Kelly got caught in a thicket of rules and procedures.
“This was a bank that knows, understands and trusts the community,” said Oak Park Village Manager Tom Barwin.
“It was there as a backstop. So they could bail out Citigroup and Bank of America but couldn’t find a way to help a relatively modest organization get over the hump? The gap between what’s happening on Main Street and what’s happening in Washington, D.C., is wide and growing.”
If you’ve never heard of Mike Kelly, you’re not alone. Although he spent three decades building a holding company called FBOP Corp. into a $19 billion powerhouse with banks in Illinois, California, Arizona and Texas, the media-averse, 64-year-old executive went to great lengths to insulate himself behind what one of his lieutenants jokingly refers to as “the Mike Kelly cone of silence.”
His sole ownership of FBOP made it the nation’s largest privately owned banking company and gave him a net worth in the billions. But Kelly has been invisible to much of Chicago, even among his peers.
“Most of the city’s bankers wouldn’t recognize him if he walked in the room,” said a rival lender.
It was always different in neighborhoods where Park National did the kind of lending other banks ignored. There, Kelly is viewed as an irreplaceable resource whose bank might quietly assist the Village of Maywood with payroll or help the Oak Park library avoid missing a bond payment.
It has already become West Side lore that the very day the Federal Deposit Insurance Corp. was closing in on FBOP, Treasury Secretary Timothy Geithner was in Chicago granting an arm of Park National $50 million in tax credits it could use to fund schools, health care facilities and new retailers.
For reasons nobody but Kelly can explain, he is deeply uncomfortable with public acknowledgment and declined interview requests. But he’s hardly shy.
Associates describe him as a tough-nosed banker first, community builder second. He built FBOP by swooping in on hobbled banks, buying them on the cheap and turning them around.
He launched his banking career in Minneapolis, landing in Chicago in 1981 after organizing a group to buy a tiny bank called First Bank of Oak Park.
At the time, said community organizer Sherlynn Reid, Oak Park was in the middle of a groundbreaking effort to prevent white flight, having passed the nation’s first fair housing law.
Shortly after Kelly arrived, Reid visited him and saw he was already enthusiastic about using loans to bolster businesses and stabilize the area. She credits Kelly and Park National with helping make Oak Park one of America’s most integrated communities.
“He saw that it was positive for the bank and the community,” she said.
Over the years, Kelly became increasingly involved in community development efforts. Several years ago, when he saw that 14,000 high-school-age students in Austin were fighting over just 7,000 public school seats, he had Park National extend a $22 million no-interest loan to build Christ the King Jesuit College Preparatory school, using the Christo Rey system pioneered in Pilsen in which students earn their tuition by working for local businesses.
Another Kelly project, said Steven McCullough, president of Bethel New Life in Austin, was a joint venture to open a bank branch near the “L” stop at Pulaski and Lake.
In a neighborhood preyed upon by payday lenders with sky-high rates, the branch lends to customers with low scores or no credit history and provides incentives for building savings accounts. Borrowers have to agree to a course in financial education, which builds financial literacy and devoted customers.
Although such activities are vital to communities, said Dan Watts, Park National’s former president, bread-and-butter lending is also crucial. Banking experts note that although national banks rely on lending formulas, community banks are more willing to take personal guarantees and unconventional collateral.
Managing that sort of risk relies on local knowledge of people and markets.
Read the original article from Tribune News Services.
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