from the Associated Press
CHICAGO – Regulators shut down the bank owned by Illinois Treasurer Alexi Giannoulias’ family on Friday, setting up an expected but daunting challenge in his bid to keep President Barack Obama’s old Senate seat in Democratic hands.
Broadway Bank, which was heavy into real estate loans and lost $75 million last year, had been given until Monday to raise about $85 million in new capital, but the Federal Deposit Insurance Corp. announced at the close of business Friday that Broadway was among four banks, all in Illinois, that had failed.
Giannoulias, 34, worked at the bank as a senior loan officer until he ran for treasurer four years ago. He has tried to take some of the political and public relations sting out of a collapse, acknowledging the bank was likely to fail but blaming the bad economy. He also said it was financially healthy when he left four years ago.
Late Friday, Giannoulias voice broke as he talked about the collapse and vowed to work harder in his bid to win the Senate race. He said he knows first hand the impact that the economy has had on people and businesses in Illinois.
“There was no bailout for my father’s bank. It is an incredibly sad and heartbreaking day for me and for my family. This bank has helped thousands of people when no one else would give them a chance,” he said.
Giannoulias’ family could collect millions in tax refunds by writing off Broadway Bank’s losses. Giannoulias said he wouldn’t take advantage of a special provision made available in the stimulus bill for writing off businesses losses. He couldn’t say if others in his family would, but said his family “will be taking a massive financial loss.”
His Republican opponent, U.S. Rep. Mark Kirk, has made the bank’s finances a central issue in the Senate race.
“While years of risky lending schemes, hot money investments and loans to organized crime led to today’s failure, it’s a sad day for Broadway Bank employees who may lose their jobs due to Mr. Giannoulias’ reckless business practices,” Kirk spokeswoman Kirsten Kukowski said in a statement Friday night.
Regulators planned to work through the night to close out Broadway’s books and the branches would open normally on Saturday, said FDIC ombudsman’s office spokesman Rickey McCullough.
Some leading Republicans seemed reticent to score political points over the closure immediately after the announcement. Illinois Republican Party chairman Pat Brady declined to comment, as did former Republican Gov. Jim Thompson.
“I know Alexi,” Thompson said. “I’m sure this is not an easy time for him.”
Giannoulias’ campaign and Democratic insiders have maintained he can still beat Kirk, a moderate Republican and an officer in the Naval Reserves. Democrats outnumber Republicans in Illinois, and Obama remains a popular figure in the state.
And on Friday, the White House said Obama intends to help Illinois Democrats “up and down the ballot.” Giannoulias campaign chairman, U.S. Sen. Dick Durbin, said Friday before the bank failure that the White House has asked about the state of Giannoulias’ campaign. A spokeswoman contacted Friday evening said Durbin would not comment further.
Joey O’Neill, a Broadway customer for 20 years said Friday that he won’t hold the bank’s failure against Giannoulias.
“They’ve always been good to me,” O’Neill said before the bank closure was announced.
Giannoulias’ family could walk away with millions in tax refunds after writing off Broadway Bank’s losses — giving Kirk the chance to paint him as a fat cat.
Kirk — who raised $2.2 million in the first quarter of the year compared to $1.2 million for Giannoulias — also has criticized some decisions made while Giannoulias worked at the bank, including revelations that it had loaned $20 million to two convicted felons.
The campaign portrayed the loans as old news that Giannoulias has addressed before. He has said the bank’s relationship with one man started before he worked there.
But with the election nearly seven months away, the campaign has time on its side to try to repair any damage and change the focus of the race — and help Democrats avoid the embarrassing loss of another high-profile Senate seat.
“When I decided to run, I knew it was going to be tough,” Giannoulias said this month in a speech to a Chicago civic club. “Examining my record is one thing, but putting your family in the line of fire is quite another. Believe me, it’s not easy. But I didn’t get into this race because I thought it was going to be easy.”
Giannoulias’ campaign has not talked specifically about the strategy for dealing with a bank failure. Spokeswoman Kathleen Strand said this week he will focus on the economy and creating jobs, arguing that the bank’s problems are not major issue for some people.
All of Broadway’s deposit accounts, excluding certain brokered deposits, were transferred to MB Financial. Former Broadway employees would become employees of MB Financial Bank, McCullough said.
Demetris Giannoulias, Alexi Giannoulias’ brother and the bank’s chief financial officer, issued a statement that said the family “fought to carry out the vision my father had when he founded Broadway Bank 30 years ago, but our bank — like many businesses — has struggled during these challenging times.”
Six other banks also were closed in Illinois, the FDIC announced. Customer accounts are insured by the FDIC up to $250,000.