FOR IMMEDIATE RELEASE
September 27, 2012
TV Ad Exposes Troubling Details about Dave Spence’s Bank Bailout
$40 Million in Taxpayer Money Vanished – Where Did It Go?
ST. LOUIS, MO -- The Nixon for Missouri campaign released a new TV ad today that reveals new and troubling details about Dave Spence’s actions while running a troubled St. Louis bank that took – and still refuses to repay – a $40 million bailout from Washington. Shockingly, before Spence voted not to repay that bailout to taxpayers, he and his fellow bankers approved $40 million in insider loans for themselves – including a loan for Spence to buy a million-dollar vacation home.
You can watch the ad, which is airing statewide, here: http://www.youtube.com/watch?v=ooASrUoFy5M&feature=youtu.be
“The more we know about Dave Spence and his bank’s $40 million bailout, the clearer it becomes that this is a guy who’s made a habit of looking out himself and his own bottom line at taxpayers’ expense,” said Oren Shur, Nixon’s campaign manager. “It’s bad enough that Dave Spence ran a reckless bank that took a $40 million bailout from Washington and then voted not to repay that bailout to taxpayers – but how does he explain taking an insider loan for a million-dollar vacation home while taxpayers are still out $40 million? In the six months since these revelations surfaced, Dave Spence still hasn’t answered the simple question: If there was money for him to buy a million-dollar vacation home, why wasn’t there money to repay taxpayers?”
After taking a $40 million bailout from Washington, Spence’s bank proceeded to give $40 million in insider loans to its executives and board members – including a million-dollar loan for Spence to buy a lakefront vacation home. And when the bank board took a vote on whether or not to repay the taxpayers, Dave Spence voted no. [St. Louis Post Dispatch, 4/5/12; Associated Press, 3/31/12]
The bank was also repeatedly reprimanded by federal regulators for making risky investments and engaging in unsound practices. Last month the St. Louis Post Dispatch reported that the bank, which still hasn’t repaid a penny of its federal bailout money, was the only bank among the 10 largest locally chartered banks to post a loss for the first six months of the year. [St. Louis Post Dispatch, 8/17/12]
Meet Dave Spence
He helped run a St. Louis bank.
Spence Helped Lead Reliance Bancshares and Its Main Subsidiary for Years – Became One of Bank’s Largest Shareholders. Dave Spence joined the board of directors of St. Louis-based Reliance Bank, the main subsidiary of holding company Reliance Bancshares, in 2005 and was elected to the parent company’s board in May 2009. [St. Louis Post-Dispatch, 05/13/05; Reliance Bancshares, DEF 14A, 2009 and 2010]
• Possessed “Ultimate Responsibility for the Conduct of the Banks’ Affairs.” According to a guide for bank directors from the Federal Reserve, “directors are an important part of a bank’s governance system, possessing ultimate responsibility for the conduct of the banks’ affairs.” [Basics for Bank Directors, Kansas City Federal Reserve]
• Responsible for Ensuring “Proper and Profitable Conduct.” According to the FDIC, a bank’s “board of directors is responsible for ensuring the proper and profitable conduct of banking activities…” [FDIC Risk Management Manual]
Ran it right into the ground with bad investments
Spence’s Tenure at Reliance Coincided with Reckless Growth. Shortly after Spence joined the board, Reliance was described as “one of the most aggressive local banks.” Reliance expanded into regions like Houston, Phoenix and Florida, only to be dragged down by “significant real estate loan losses” once the bubble burst. [St. Louis Post Dispatch, 6/3/05; St. Louis Business Journal, 3/17/08; 11/5/07; 8/12/11]
Federal Regulators Cracked Down On Reliance’s Risky Business Practices. Reliance’s operations were so bad that they caught the attention of federal and state authorities. For example, the FDIC and the Missouri Division of Finance told the bank to stop making “loans which might violate the Bank’s written loan policy” and to “reduce the level of risk.” Later, the FDCI urged Reliance to “examine management.” [Reliance Bancshares, DEF 14A, 2011; Form 10-K, 3/30/11; St. Louis Business Journal, 03/25/11]
Reliance Reported Highest Losses of Any St. Louis Bank in 2011. In the first quarter of 2011, Spence’s last quarter on the board, the bank had “the highest loss of any St. Louis-chartered bank.” [St. Louis Post Dispatch, 5/13/11]
…And Received “F” Rating from Bank Rating Firm. When David Spence resigned from the Reliance Bancshares board in March 2011 the company exhibited “significantly higher stress than the industry average,” due to “a negative net income earnings profile, lending default rates that are higher than industry average, [and] lower capital adequacy versus the industry.” As a result, it received an F rating from Institutional Risk Analytics. [IRA Bank Rate, 3/15/11]
Reliance Still Worst-Performing Bank in Region. “Frontenac-based Reliance Bank was the only bank among the 10 largest locally chartered banks to post a loss for the first six months of 2012, according to the Federal Reserve.” [St. Louis Post Dispatch, 8/17/12]
Spence’s bank took a $40 million bailout from Washington
Reliance Bancshares Took A $40 Million Washington Bailout – And Still Refuses to Repay Taxpayers. On Feb. 13, 2009, Spence’s bank, “received $40 million from the U.S. Treasury under the Troubled Asset Relief Program, known as TARP.” Reliance “has yet to repay a penny of its federal money.” [AP, 3/31/12; St. Louis Business Journal, 3/11/11]
Bank Certified That Spence Had No “Disagreements” With Bank Practices. According to a statement filed with the Securities and Exchange Commission, Spence’s resignation was “not related to any disagreements with [Reliance’s] operations, policies or practices.” [Reliance Bancshares Form 8-k, 3/16/11]
Dave Spence: “Our bank, after I was in, took TARP funds.”
At Christian County Forum, Spence Said “Our Bank, After I Was In, Took TARP Funds.” At a forum in Christian County, Spence told the audience: “You know, as far as the TARP and everything else, I served on a bank board. It was crazy. Our bank, after I was in, took TARP funds.” [Spence at Christian County Lincoln Days, 4/28/12]
Instead of repaying the bailout, Spence got an insider loan from his own bank to buy himself vacation home.
A million dollar mansion.
So Dave Spence used the bailout money to help himself, instead of repaying taxpayers.
Spence Admitted to Voting Against Repaying Taxpayers As Member of Bank Board. Spence admitted to the Associated Press that “he voted with the rest of the bank board in early 2011 to forgo payments to the U.S. Treasury” on the bank’s TARP debt. [Associated Press, 3/31/12]
Instead of Helping Families, Spence’s Bank Loaned $40 Million to Executives and Directors – Including Dave Spence. “Mr. Spence and the rest of the board voted in early 2011 not to repay the $40 million in TARP money to the federal government. This was after the bank voted in 2009 and 2010 to approve loans, in approximately the same amount, to bank board members and executives.” At the same time, the bank failed to adequately serve low- and moderate-income households, according to a complaint filed by the St. Louis Equal Housing Opportunity Council. [Post-Dispatch, 4/5/12, 11/30/11]
• Spence Got An Insider Loan For a Million Dollar Vacation Home. In April 2010, Spence “took out a more than $1.1 million mortgage on a vacation home at the Lake of the Ozarks and a smaller loan on his business property.” [Camden County Property Records; Associated Press, 3/31/12]
• Mansion Has 5 Bedrooms, 7 Bathrooms. In addition to 5 bedrooms and 7 bathrooms, a realtor’s description of the property says the house includes a “new private pool, extensive landscaping with river & waterfall, and lakeside patio.” [180 Hillside Court, Zillow.com; Lora Elliott Blog, Trulia.com]
• Experts Say “Insider Lending to Directors is Particularly Troublesome.” As reported by McClatchy, “Insider lending to directors is particularly troublesome because it could cloud the judgment of people charged with protecting shareholders and overseeing bank management, the experts say… Insider loans, ranging from home mortgages to multi-million dollar lines of credit for big companies, are legal but are largely shrouded from public scrutiny.” [McClatchy, 3/22/09]
• Spence’s Loan Was Approved by the Board of Directors; Spence Served on the Board of Directors. “As a board member, Spence was considered a bank ‘insider’ under federal regulations, and his loans thus required approval by the bank's board of directors. But Spence said he left the room while his colleagues voted to approve each of his loans.” [Associated Press, 3/31/12]
Reliance Still Hasn’t Repaid Its $40 Million Bailout…and Spence’s Mortgage on Vacation Home Has Not Been Satisfied. [SIGTARP Quarterly Report to Congress; Camden County Property Records]
Spence Also Personally Benefited by Being One of Bank’s Largest Shareholders. In addition to serving on the board of directors, Spence was also one of the largest shareholders in the company. Spence owned nearly 600,000 shares of Reliance Bancshares stock – stock that would have been worth much less had the bank not been infused with $40 million in government bailout funds. In fact, Spence bought $1.5 million worth of Reliance Bancshares stock just a few months before he and his fellow board members opted to stop paying back Reliance’s TARP debt. [Reliance Bancshares, SEC Form 4, 9/20/10; Reliance Bancshares FR Y-6, 12/31/10]