Goldman Sachs Group Inc and a consortium of other top banks are part of an effort to save ShoreBank Corp, a Chicago bank with Washington ties, a community activist close to the institution said on Friday.

Goldman, Citigroup , JPMorgan and Bank of America are helping raise the $125 million the troubled community development lender needs to avoid a government takeover, said the activist, Bill Brandt, chairman of the Illinois Finance Authority, a state economic development entity.

ShoreBank is just one of hundreds of small U.S. banks dealing with distressed loan portfolios. But it has built strong political ties, largely because of the national recognition it has received over the years for its efforts to extend loans to low-income communities and environmental causes.

The bank, whose website even boasts of a connection to President Barack Obama, and its plight have become a positive publicity opportunity for Wall Street banks facing increased scrutiny over their role in the recent financial crisis.

My understanding is that Goldman Sachs has made a significant commitment and will act on this commitment today, Brandt said. Whether this deal gets finally cooked is a Herculean task.

Brandt said Goldman agreed to contribute more than $20 million to help rescue the bank.

Goldman Sachs has been trying to burnish its image after confronting political pressures and populist anger over its quick turnaround and perceived lack of concern over the economic downturn.

Its image was further tarnished last month when the U.S. Securities and Exchange Commission brought fraud charges against the firm.

JPMorgan is considering a financing package of about $15 million that would include converting existing debt to equity as well as a cash investment, a person familiar with the bank's plan said. The second-largest U.S. bank is already an investor in ShoreBank.

Goldman Sachs, Citigroup, Bank of America and JPMorgan declined to comment.

A person familiar with the capital-raising efforts said ShoreBank is $10 million to $15 million short of the $125 million capital target set by regulators. The bank hopes to obtain enough commitments on Friday to get the full amount required, the source said, speaking anonymously because of the sensitivity of the matter.

It is unclear how quickly the Federal Deposit Insurance Corp could take the bank into receivership if it does not come up with a recapitalization plan that satisfies regulators.

The FDIC typically announces the seizure of banks on Friday evenings, but regulators will hold off on seizures if there is a viable white knight investor.

ShoreBank, which has $2.3 billion in assets and is nationally recognized for its programs to lend to low-income communities, faces a Monday deadline to show it has met regulators' capital demands.

We're working expeditiously on our capital raise, and we appreciate all parties, including a number of banks, who are supporting us in this effort, said Brian Berg, a spokesman for ShoreBank. He declined to name any institutions helping in the effort.

The Wall Street Journal reported that Goldman Sachs Chief Executive Lloyd Blankfein had discussions with FDIC Chairman Sheila Bair about helping the bank. The FDIC declined to comment.

ShoreBank has kept a high profile in the community development world. It focuses on loans that contribute to environmental efforts and targets borrowers looking to convert deteriorated apartment buildings into income-producing properties, expand small businesses, and upgrade homes and property.

It was especially hard-hit during the recession, reporting a net operating loss of $53.6 million in 2009. In 2008 it eked out net operating income of $1.3 million.

Helping lead the bank's capital efforts is prominent Washington figure Eugene Ludwig, former comptroller of the currency and now chief executive of Promontory Financial Group.

Ellen Seidman, a former head of the Office of Thrift Supervision, serves as executive vice president of national policy and partnership development at ShoreBank.

Seidman is also a founding council member in Goldman Sachs' 10,000 Small Businesses initiative.

Berg was careful to note that no one within ShoreBank has reached out to anyone in the White House.

(Reporting by Karey Wutkowski in Washington and Steve Eder and Emily Flitter in New York; additional reporting by Elinor Comlay in New York; editing by John Wallace and Matthew Lewis)