Did this come as a surprise? Hardly. The media flocked to all four locations of Broadway Bank, hoping to catch FDIC officials in the act of barring the doors. The drama may not have arrived, but the regulators did — and Alexi Giannoulias still faces questions about what his family did with the $70 million they pulled out of Broadway just before the financial collapse:
Broadway Bank, the family-owned lender that helped launch U.S. Senate candidate Alexi Giannoulias’ political career, was seized by government regulators Friday night, one of seven Illinois institutions taken over and sold to healthier companies.
The failure of Chicago-based Broadway, which was unable to raise the $85 million it needed to remain independent, was anticipated, and its worsening health has weighed on Giannoulias’ Democratic bid for President Barack Obama’s old Senate seat. The bank had been struggling in recent years with real estate loans gone bad, losing $75 million last year.
Giannoulias worked for his father at Broadway before entering politics, and during his successful run for state treasurer in 2006 he used his banking experience as one of his chief qualifications. But in the Senate race, he has tried to distance himself from the bank’s troubles.
The Tribune reported this month that the $1.15 billion-asset bank, founded in 1979, lent a pair of Chicago crime figures about $20 million during a 14-month period when Giannoulias was a senior loan officer.
I covered that history here, but Giannoulias has more problems with the seizure than his lending habits to organized crime enterprises. Broadway tipped over due to undercapitalization, which wouldn’t have been an issue had the Giannoulias family passed on cashing out three years ago. Not only that, but the family could realize millions in government cash from the seizure, too:
The Giannoulias family took out nearly $70 million in dividends from the bank in 2007 and 2008. Demetris Giannoulias, Alexi’s brother and Broadway’s chief executive, has said most of the money was used to pay corporate taxes and for estate planning after the 2006 death of family’s patriarch, Alexis Giannoulias.
Because of the bank’s loss last year, the family could be eligible for millions in tax refunds. Alexi Giannoulias said Friday that he would not take advantage of the carry-back provision that would have allowed him to get a refund from the bank’s failure but said he could not speak for the rest of the family. As a Senate candidate, he said, he didn’t think it was appropriate to take advantage of the provision.
Hotline reports on the spin we can expect to hear from the Giannoulias campaign — they’re victims:
The IL SEN race has increasingly focused on Giannoulias’ banking troubles, and Giannoulias’ camp has readied a messaging strategy in anticipation of today’s developments: They’re expected to argue that Broadway Bank is yet another victim of the economic downturn, and that the Giannoulias family has struggled alongside other Illinoisans and Americans.
Rep. Mark Kirk (R), whose camp has repeatedly tied Giannoulias to Broadway Bank’s troubles, is certain to mention the FDIC seizure frequently going into November.
Dems in DC and IL are worried about Giannoulias’ ability to win. The prospects of losing Pres. Obama’s old seat are so worrisome that both Sen. Dick Durbin (D-IL) and WH adviser David Axelrod are working closely with the Giannoulias camp in order to find a winning strategy.
I’d like to see the Giannoulias campaign try that line on Illinois voters. The family yanked $70 million out in profits three years ago just as the market peaked, and they’re going to get millions more from a government bailout, after giving $20 million in loans to mobsters. There may be victims in the collapse of Broadway, but they’re called taxpayers who will have to float any losses and reimbursements. It’s akin to begging a court for mercy for being an orphan after having murdered one’s own parents.