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Will The President Have No Clothes?

By Kevin Robinson in News on May 5, 2009 5:10PM

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Obama rocks the American made suit. Photo courtesy of The White House
Hart Schaffner Marx, (known as Hartmarx), the maker of President Obama's suits, is having a tough time in this difficult economy. The maker of high-end men's suits saw a significant drop-off in sales at the end of last year, as the luxury clothing market suffered from the economic crash. As then-President-elect Barack Obama was preparing to head to Washington to take the reigns of an economy that was in a free-fall, the previous administration was busily shoveling taxpayer dollars into the financial system to to prop up a faltering banking system. Among the banks that took government money to stay afloat was Wells Fargo, which accepted $25 billion in Troubled Asset Relief Program (TARP) funds. Shortly after taking that money, however, Wells Fargo cut off credit to Hartmarx, which was subsequently forced to file for Chapter 11 bankruptcy protection. Since then the manufacturer of high-quality suits, which employs more than 3,000 people in Illinois and Michigan, has been trying to regain its footing in the luxury men's apparel business.

Now three companies are bidding to take over the local suit maker: London-based Emerisque, New York-based Mistral Equity Partners, and California-based Yucaipa Cos. Emerisque and Yucaipa are likely to try and revive the brands and turn the company around. That could take longer than Wells Fargo likes, because negotiations might run past the July expiration date of Hartmarx's debtor-in-possession financing. Mistral Equity Partners, the highest bidder among the three, appears to favor liquidation of the company's assets, which would close the plants, throwing thousands of people out of work.

Local congressmen are upset with Wells Fargo, as the Sun-Times is reporting that "'a great battle is going on' among Hartmarx's lenders and secured and unsecured creditors about which bidder could accomplish a quick return." Sources tell the Sun-Times that at least one bidder might liquidate Hart Schaffner Marx, throwing thousands of people out of work. "Since they took the money, they have an obligation," Hare told Crain's. "Wells Fargo doesn't care. They just want to recoup more of their money. I find that insulting," he added. "More than 3,500 people will lose their jobs if this company is liquidated, and it was their money that went into Wells Fargo." Congresswoman Jan Schakowsky is also getting involved. "Thanks to President Obama and the Congress of the United States, Wells Fargo has received $25 billion in government funding but now may push Hartmarx into liquidation and the loss of 3500 jobs, 600 in my district," she told Crain's in a statement. "I plan to call CEO John Stumpf to urge him to accept a bidder for the company that will keep it in operation.”

Wells Fargo is expected to name their preferred bidder in a few days, although the bankruptcy action will take a few more weeks to complete.