Feds Shut Down Hill District S&L

Tim Grant, Pittsburgh Post-Gazette, August 15, 2009

The federal Office of Thrift Supervision shut down Dwelling House Savings and Loan yesterday after reporting that the minority-owned bank located in the Hill District “was in an unsafe and unsound condition, was critically undercapitalized and had no reasonable prospect of recovering.”

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“We are disappointed at this closing on behalf of Pittsburgh, but especially for the Hill District and other predominately African-American communities in the city where Dwelling House has played such a significant role,” said Doug Root, a spokesman for the Heinz Endowments.

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Dwelling House was the lender of first and last resort for two generations of black families in the Pittsburgh community, but it suffered a severe blow to its stability late last year when federal auditors discovered that about $3 million had been drained out of its capital account and the bank was actually operating with $500,000 in negative equity. Bank officers blamed the heavy losses on the work of a ring of cyber thieves. Pittsburgh police and FBI agents are investigating the case, but no charges have been filed.

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The OTS fined five directors of Dwelling House over the last two weeks for failing to take steps to protect the minority-owned institution even after they had been warned five years ago of its vulnerable predicament.

Former Dwelling House president and CEO Robert M. Lavelle, who was fired in November by order of the OTS, also was fined $5,000 last week for his role in the gross negligence that ultimately brought down the bank.

Board members Barry Balliet, Everett Blanton, David Lendt, Johnnie Monroe and Robert Thornton were fined $1,000 each for multiple violations of a 2006 OTS order that required the institution to adopt money laundering preventions.

The institution has been the focus of scrutiny by federal regulators for at least five years. Regulators were concerned about Dwelling House’s role in providing banking services to prison inmates.

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Ultimately, federal authorities restricted the bank from opening new prisoner accounts and restricted all existing accounts to $25 maximum deposits. Regulators prohibited any more electronic transactions involving prison inmates, and also required Dwelling House three years ago to submit to a mentoring arrangement with executives at Dollar Bank.

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In 1984, there were 79 thrifts in the country classified as minority owned, which includes African-American as well as Hispanic- and Asian-owned thrifts. With the failure of Dwelling House, today there are only 20 left, including only 11 African-American thrifts.

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