Bank with Blago-Rezko ties reprimanded by Feds

Crain's Chicago Business reports:

State and federal bank regulators have slapped Mutual Bank of Harvey, a politically connected bank tied to Gov. Rod Blagojevich, with an order requiring it to overhaul lending policies and standards, raise capital and recognize more loan losses.

The Dec. 19 cease and desist order, released Friday, was issued jointly by the Federal Deposit Insurance Corp. and the Illinois Division of Banking. The order wasn’t unexpected in light of loan-quality problems at the $1.7-billion bank. Through the first nine months of 2008, Mutual Bank lost $17 million after adding nearly $40 million to reserves for bad loans.

The low-profile bank, run by Amrish Mahajan, earned notice after then-U.S. Sen. Barack Obama ran into problems with the purchase of a mansion in Chicago’s Kenwood neighborhood. Mutual Bank provided a $500,000 mortgage to the wife of now-indicted businessman Tony Rezko, a major fundraiser for the governor and Mr. Obama, to purchase a lot next to the Obama home. The Rezkos then sold a portion of the lot to the Obamas. Mr. Obama admitted later that he shouldn’t have involved the Rezkos in his home purchase.

Mr. Mahajan also has been a big donor to the governor’s campaigns, helping raise more than $500,000 since 2001, according to a 2007 story in the Chicago Tribune.

Here's more on the man Blago's kids call Uncle Amrish.No word yet from Barack Obama on any of this.