Giannoulias Bank Under Fire From Regulators

By Staff in News on Jan 27, 2010 9:20PM

Special to Chicagoist from Mike Fourcher

It's the time for last minute election game changers, and the latest news about U.S. Senate candidate Alexi Giannoulias' family bank may make a big difference in Illinois' U.S. Senate Democratic primary. Crain's Chicago Business reported this afternoon that the Federal Deposit Insurance Corporation (FDIC) and the Illinois Division of Banking signed a consent decree yesterday with Broadway Bank, which is 100% owned by the Giannoulias family. The decree, according to Crain's, requires the Giannoulias family to put $19 million in capital into the bank immediately as a result of "mounting delinquent loans."

While Broadway Bank was one of Illinois' best performing banks during the last decade's real estate boom, the bank's fortunes reversed following the real estate crash, as a large percentage of the bank's portfolio has become non-performing. In other words: They made lots of bad loans during the boom. Just prior to the bank's reversal of fortunes, the Giannoulias family withdrew $70 million in capital from Broadway, a payout more than ten times larger than most banks it's size. Since 2005, Alexi Giannoulias has received more than $8 million in payouts from Broadway Bank. Prior to becoming Illinois Treasurer and a U.S. Senate candidate, Alexi Giannoulias was an officer of the bank and oversaw the bank's lending operations - during which most of Broadway's current bad loans were made.

Probably more damaging to Treasurer Giannoulias is not that his family needs to pay back the money, but that the Consent Decree requires Broadway Bank to hire an outside consultant to review “all senior executive officers to determine whether these individuals possess the ability, experience and other qualifications required to perform present and anticipated duties, including adherence to the bank’s established policies and practices, and restoration and maintenance of the bank in a safe and sound condition.” In FDIC-speak, this is, "we're not sure you did a good job handling other people's money in the past. So you'll have to earn our trust going forward."

You can bet that Democratic U.S. Senate opponents David Hoffman and Cheryle Jackson are going to be making hay out of this in the coming days and the primary looming next week.

Watch this spot for the consent decree, when it is made public.