Sherwin Loudermilk in the lobby of the White's Building.

AUGUSTA, GA -  “It’s just one of the saddest things I’ve been personally involved in.”

As the owner of Casa Blanca, the Broad Street cafe located on the first floor of the White’s Building, Jai West knows firsthand just how far the toppling line of dominoes can fall in today’s economy. When Duluth-based Haven Trust Bank was seized by the Federal Deposit Insurance Corp. (FDIC) back in December, she was a struggling businesswoman with a light at the end of the tunnel — completion of the White’s Building — but thanks to the government’s inability to adequately handle the loan its developers need to finish the project, she finds herself a struggling businesswoman with significantly darker days ahead.

She’s been told that, even if the government forecloses on the building, she should be OK as long as she continues to pay her rent, but being OK isn’t exactly how things were supposed to be.

“The main reason for choosing this building was that I was going to have so much built-in business,” she says. “I tell people it feels like I’m on an island all by myself over here.”

That’s because the White’s Building, though more than 90 percent complete, is caught in a riptide of governmental ineptitude that’s kept progress at a standstill since the FDIC took over the bank on Dec. 12.

Currently, 12 of the 17 finished condos are occupied, with the remaining 34 waiting for the finishing touches. Until the situation is resolved, however, even the finished condos can’t be sold.

“Before the FDIC took over Haven Trust, we were fine,” says Sherwin Loudermilk, who, together with Mike Raeisghasem, owns the project. “Even though there were delays in getting the money [due to the bank’s worsening fiscal health], we were getting the money. We were communicating with them and whatever they’d do, they’d put it in writing.”

Loudermilk accuses FDIC representatives of everything from indifference to incompetence.

“We were close to a draw well before the bank failed, so we were already in a position that we were owed money for a few weeks before the FDIC took over,” he says. “Then, the FDIC took over on Dec. 12 and it has just absolutely stopped. There are lots of promises being made, but absolutely nothing has happened.”

One of those promises was access to an emergency fund, something the FDIC never delivered.

“We made it very clear to them that we’d take different measures if they told us that there was a chance of not getting this money, but they said, ‘Oh, absolutely — it’ll go through, no problem.’”

So they started going through the process, but as the time delays mounted, the FDIC started looking at the project as one that was beginning to take a turn for the worse.

“I don’t care who you are,” Loudermilk says. “If you’re 90 percent complete with a project, that’s the critical time for the finances to come in. Everything is coming together at the same time, and if your money is jeopardized at that second, there are going to be liens and suppliers wanting their money.”

With the previously healthy project now looking shaky, the FDIC decided the White’s Building was flawed, in spite of the fact that things were going just fine until they got involved.

“That is the only thing that went wrong,” says Raeisghasem. “The FDIC took over the bank.

Of course, it’s not the FDIC’s fault. It’s not my fault. It’s the bank’s fault, but that bank is gone. We don’t have any recourse.”

Such a situation doesn’t surprise Randy Griffin, president of CSRA Business Lending, a nonprofit corporation licensed to provide specific financial assistance to small businesses.

“For the most part, if you had a loan commitment with a bank and the bank failed, all bets are off,” he says. “You would think if you had a bank commitment that the FDIC would have to honor that bank commitment, but that’s not the case.”

Griffin says what’s happening as a result of the Haven Trust collapse is going on throughout the state.

“I feel for the guys,” he says. “I’ve been with my company 22 years, and around Augusta there are people hurting through absolutely no fault of their own.”

David Barr, a spokesperson for the FDIC, sees things a little differently. Though he can’t speak specifically about the White’s Building, he says there are two sides to every bank failure.

“You do have the borrowers that are looking to finish projects, but you also have creditors of the failed bank, people who provided services and work to the institution before it failed who are also owed money,” he says. “The FDIC as a receiver has a fiduciary responsibility to maximize the return to them.”

According to Barr, a borrower basically has two options — convince the FDIC that the project is viable and can be funded, or try to go elsewhere and refinance, which is nearly impossible given the current risk-averse climate and the fact that the FDIC is pressuring healthy banks to cut their number of development loans.

It’s like giving a starving man a can of stew while withholding the can opener.

In spite of the challenges, however, Loudermilk says he has found three separate lenders willing to buy the loan from the FDIC, yet the agency is unwilling to work with him, reportedly because it would violate procedure and could possibly look like favoritism.

According to Loudermilk, any appearance of favoritism would be just that — appearance.

“When a bank purchases the note at a discount, they’re purchasing the note. I still owe the same amount — just because they bought it for 70 cents on the dollar doesn’t mean they have to give me a break. I still owe them 100 cents on the dollar.”

Instead of taking one of the offers, the FDIC will most likely put the loan in a pool of non-performing loans and sell it for far less on the dollar, which, according to Griffin, is just being lazy.

That laziness ultimately hurts more than just Loudermilk and Raeisghasem, however. If the project deteriorates to the point where it goes into foreclosure, everyone currently owed money by the project gets nothing. And if that happens, Loudermilk could actually end up in the driver’s seat… possibly in a better financial position than he was in the beginning.

That’s the painful irony of the situation. The way Loudermilk describes it, whoever buys the discounted loan could very possibly want him to buy back in for less than he owes now.

While there’s no guarantee it will happen that way, the possibility could be avoided if the FDIC would just go ahead and allow it to be sold to one of the lenders Loudermilk has already found. That way, everyone who’s owed money can get paid.

Banking insiders insist things are going to get worse before they get better. As many as 200 banks could be seized by the end of the year.

That’s a very, very long line of falling dominoes, and if the White’s Building truly does end up being one of them, Jai West says it will be a tragedy.

“It won’t just be a huge loss for me if it doesn’t work out for Mike and Sherwin, it’s going to be a huge loss for this city, because they’ve invested their lives here,” she says. “They love it here.”