CHICAGO (AP) — With the public still furious over bank bailouts, Democrats desperate to keep President Barack Obama's old Senate seat are scrambling to counter revelations that a bank owned by their candidate's family may be nearing collapse.
Alexi Giannoulias, the first-term Illinois state treasurer and an old basketball buddy of Obama's, has tried to answer away questions about the bank's troubles, saying he hasn't worked there in four years and that it was victim of the same real estate slump that hurt the rest of the economy.
Republicans have been quick to portray him as a failed businessman, citing the bank's financial woes and his involvement in loans to a convicted bookmaker. It's swiftly become the focus in one of the nation's hottest Senate races. Republicans, who recently gained the late Edward M. Kennedy's Senate seat, are targeting Obama's former seat as their next big prize as they to try to erode the Democrats' hold on Washington.
"If the Republicans can show what they're trying very to hard to do, that Giannoulias engaged in questionable business practices ... then I think it can have a very direct impact on the campaign," said Robert Rich, director of the University of Illinois' Institute for Government and Public Affairs.
The Republican nominee, five-term congressman Mark Kirk, has accused Giannoulias of having "direct, personal responsibility for reckless loans." Rich said the tactic could backfire if Giannoulias isn't linked directly to the problems at Chicago-based Broadway Bank, because many other banks have failed.
Giannoulias, who was the senior loan officer at the bank, gave a round of interviews last week to talk about the bank's problems — something he didn't do in detail before the Feb. 2 primary because he said it could wait. But instead of diffusing Republican criticism, Giannoulias appeared to stoke it by predicting that it would be hard for the bank his father founded in 1979 to survive.
"I hope it will be around," Giannoulias told The Associated Press. But, "it's quite likely that, you know, it's going to be very tough for them."
Heavy into real estate loans and weighed down by bad debt, Broadway Bank lost $75.3 million last year. It entered into a consent decree with regulators in January that gives it 90 days — until the end of April — to raise about $85 million. It may get help from private investors, longtime customers and the Giannoulias family, which has been criticized for taking large dividends from the bank in the past.
Giannoulias, who touted his banking experience when he ran for state treasurer four years ago as a 30-year-old political novice, notes that the bank has about $242 million in nonperforming assets or bad loans and only about 9 percent of the value of those originated when he worked there.
"I haven't worked at my family's business for over four years and when I left it was profitable and very well-capitalized," Giannoulias said in a recent letter to supporters.
But just like when he ran for treasurer, Giannoulias has had to explain why the bank loaned millions of dollars to Michael Giorango, a convicted bookmaker.
"As far as the details of Giorango, which we've answered 100 times, this is a relationship that was started before I got to the bank. Was I involved in some of the servicing of the loans? Yes," Giannoulias recently told the Chicago Tribune editorial board.
Republicans have sought to bring Obama into the fray, noting the president's criticism of bankers who got rich at the expense of the public.
"There are many things you can be involved in that would probably be less able to strike a nerve with voters than being involved in a bank failure," said Illinois Republican Party chairman Pat Brady.
U.S. Sen. Dick Durbin, Giannoulias' campaign chairman, said problems at Broadway Bank won't doom Giannoulias' Senate candidacy because other banks are struggling too. The 140 bank failures last year were the highest since 1992 at the height of the savings and loan crisis, and came after just 25 bank failures in 2008.
And while Giannoulias wasn't the White House's top choice — officials tried to persuade popular Illinois Attorney General Lisa Madigan to run — Durbin said the situation won't make big-name Democrats and Obama himself shy away from Giannoulias, because their goal is to keep the Senate seat. In fact, Giannoulias' campaign said he was invited to the White House for a Greek Independence Day celebration and will meet while he is there with senior Obama adviser David Axelrod.
Giannoulias says the economy, not his family's bank troubles, are what people are worried about.
"When I travel the state and I talk to folks, their concerns are how you going to create jobs, how you going to turn this economy around, how you going to help make sure that what took place never happens again," Giannoulias said.
