The Tragedy of Dwelling House Savings and Loan

Matt Stroud is the former editor of Next American City, and currently reports for the Innocence Institute of Point Park University — a nonprofit journalism organization that investigates claims of wrongful incarceration within 100 miles of Pittsburgh, Pa. For more information, contact him at mstroud@pointpark.edu.

Dwelling House Savings and Loan, a 119-year-old bank in Pittsburgh’s storied Hill District, was the first — and one of the only remaining — black-owned, FDIC-backed financial institutions in the nation. It was also one of the only national banks that allowed incarcerated prisoners to open and maintain accounts. It was shuttered on August 14.

Dwelling House has been in financial trouble at least since July, after investigators realized the small, $13.8 million bank had taken on more than $3 million in fraudulent debt. A coalition of mostly Pittsburgh-based foundations — including Dollar Bank, the Heinz Foundation, the Pittsburgh Foundation and several others (the FDIC offered no monetary support) — had agreed to bail Dwelling House out and hopefully keep the company afloat. But just before the bailout went through — in the final minutes before 5pm, August 14 — the FDIC and Office of Thrift Supervision (OTS) discovered more than a million dollars worth of additional, as-yet-undiscovered debt. The independent bailout effort died then and there.

According to the Pittsburgh Post-Gazette — which ran the most comprehensive story to date about Dwelling House’s demise — the bank’s “mission of serving an underserved population meant not always listening to common wisdom”:

“Instead of relying on complicated risk profiles to make loan decisions, Dwelling House took chances that many commercial banks would not have taken on low-income borrowers. And it was not uncommon for the thrift’s officers to visit people’s homes to give them financial counseling. That commitment to helping the underprivileged might have been part of the bank’s own undoing.”

Dwelling House’s closure is one of the sadder financial news stories of the year, underscoring the Fed’s commitment to support massive corporate banks over small, community-based institutions. Eighty-one US banks have closed in 2009, and the overwhelming majority have under $200 million in assets. What’s more, Dwelling House’s Hill District location is now owned by PNC Bank — which 1) has more than $200 billion in assets, 2) received $7.7 billion from the bailout last year, and 3) used those funds to purchase a smaller competitor, National City, last October. The Associated Press reports that “many of the recently shuttered banks were undone not by exotic mortgage products but by garden-variety loans,” and this seems consistent with the national financial trend — that this latest round of closures largely affects small banks, not large ones.

Somehow none of this seems surprising. In the wake of a largely bi-partisan, “too big to fail” mentality supported to the tune of $1 trillion by the Federal Government, there was never any reason to believe the US’s largest private financial institutions would not be federally backed. But as more small, independent banks fail, it’s worth asking what Big Government Support For Big Business means for small business owners, community banks, financial entrepreneurship, and the diversity of cities in general.

Tags: pittsburgh