Illinois Republican Party

Giannoulias' bank problems won't go away
3/4/2010

By Mark Brown - Chicago Sun-Times

State Treasurer Alexi Giannoulias has a big problem. The family-owned bank from which he launched his political career is in danger of failing with even Giannoulias now conceding the likelihood of it doing so before the November election.

Giannoulias, the Democratic nominee for the U.S. Senate, can explain everything.

He can explain and explain and explain, as he did Wednesday after taking off his suit coat to sit down to patiently answer questions from the Sun-Times editorial board for 75 minutes before rushing over to the Tribune to do the same thing -- all in hopes of putting the matter behind him and getting on with his campaign.

But when his explanations are finished, certain unpleasant facts remain:

The Giannoulias family's Broadway Bank bet everything on a rapid-growth business strategy that in the end failed miserably.

The federal government, in the form of the Federal Deposit Insurance Corp., will get stuck with the tab from the bank's bad loans in the event of its closure, sure to amount to tens of millions of dollars.

While the bank's failure may wipe out much of the Giannoulias family fortune, it does so only after years of family members profiting handsomely, including $69 million in dividends they collected in the two-year runup to the real estate market collapse that proved its downfall.

Then there's still the messy business first revealed four years ago about how Giannoulias, himself, was involved in making some of the bad loans to individuals who turned out to have organized crime connections.

But Giannoulias' problem is even more fundamental.

The only real qualification for state treasurer he could cite when he came out of nowhere at age 29 to run for office in 2006 was that he had been the bank's chief lending officer for a couple of years.

Now Giannoulias concedes he was partly responsible in that post for the business approach that led to Broadway's downfall, which was to sink everything into making commercial real estate loans.

While Giannoulias still denies this was a risky strategy, the proof is in the pudding. And while he left the bank in 2006 and is no doubt correct when he attributes its business philosophy to his late father, Alexis, the bank's founder, he cites no attempt to have ever pointed his father in another direction.

It's enough to make a person sit back and ask themselves how Giannoulias got to be treasurer in the first place, let alone seek a promotion to the Senate just four years after arriving on the scene.

Giannoulias is a natural-born politician, bright and personable, and I'm obviously more philosophically aligned with him than his Republican opponent, Rep. Mark Kirk. Still, I'm afraid his candidacy is dead on arrival.

For Giannoulias to have a chance, he'll have to convince Illinois voters that what really matters in this election is that he'd be the better person to reflect their views with his votes in the Senate than the Republican Kirk -- and that all this other stuff is extraneous. It's not extraneous to me.

Giannoulias got elected in the first place mainly because Barack Obama gave him his seal of approval, and because Giannoulias had the money through his family to air enough television commercials to make sure everybody knew it.

Giannoulias' first campaign contribution was a $200,000 check from his father, Alexis, in November 2005. After his father's death, the estate of Alexis Giannoulias loaned $800,000 to his son's campaign for treasurer, while Alexi's mother, Anna, loaned about $1.5 million more. Those loans are still carried as debts of his Citizens for Giannoulias campaign fund. All together, the family chipped in half of what Giannoulias spent in 2006.

At the time, the Broadway Bank was a high-flying Edgewater-based community bank making loans in such far-flung locations as New York, Florida and California. The aggressive growth strategy more than tripled the size of the bank between 2000 and 2005 and then doubled it again by 2008, taking it from a $200 million to $1.1 billion institution in just a decade.

Giannoulias says the bank would still be fine if not for the recession. Wouldn't we all.

His political opponents have been privately predicting Broadway's failure for several months now, public predictions of a bank's failure being a tricky legal matter. And that was just the Democrats.

The Republicans have been even more relentless about Giannoulias' bank problems in the month since the primary election.

They're only too happy for Giannoulias to explain and explain and explain, all the way to November.

SOURCE: Chicago Sun-Times

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