Banking past haunts Obama friend Giannoulias
President Barack Obama invoked the latest political insult to the financial industry when he appeared with Democrat Martha Coakley in Massachusetts two days before her U.S. Senate loss.
"Bankers don't need another vote in the United States Senate -- they've got plenty," he said Jan. 17 in Boston, signaling a broader strategy to tie Republicans to Wall Street greed.
In the race to fill Obama's old Senate seat, the banker in question is a Democrat, Alexi Giannoulias, a presidential friend whose family's bank once held deposits for an Obama campaign committee.
As candidates from both parties on the campaign trail try to tap populist ire around names like Charlotte, North Carolina- based Bank of America Corp., and New York's Goldman Sachs Group Inc., Chicago's Broadway Bank has presented challenges for the Democratic frontrunner ahead of the Feb. 2 Illinois primary. Giannoulias, 33, a former senior loan officer and bank vice president, now serves as treasurer of Illinois.
One of his opponents has sought to make the family bank a liability, and regulators provided fresh ammunition for those charges this week.
Broadway agreed to boost reserves for bad loans and halt paying dividends without regulatory approval, according to an order from state and federal agencies signed Jan. 26. The bank's board of directors also must establish "well defined and reasonable risk limits" and hire an outside party to assess qualifications of senior executive officers, according to the order.
The $1.2 billion community bank, founded in 1979, has been part of Giannoulias's public profile since he won election in 2006 because it made loans to a bookmaker as well as convicted Illinois influence peddler Antoin "Tony" Rezko.
"Banking has nothing to do with my history, my work," former Chicago Inspector General David Hoffman, 42, said at a Dec. 16 Democratic debate. "But the person to my right, it's a critical part of his experience. In fact, he's only held two jobs, and the job just before this one was as a vice president and chief loan officer of a bank that is now one of the worst performing in the country."
The bank lost $27.3 million during the first nine months of 2009, records from the Federal Deposit Insurance Corporation show. It suffers from a commercial real estate delinquency rate of 21.7 percent, compared with a U.S. average of 8.3 percent, according to an analysis compiled for Bloomberg News by Foresight Analytics, an Oakland, California-based research firm.
Hoffman unveiled an ad Jan. 25 that questions Giannoulias' ability to "take on Washington spending and Wall Street abuses."
In an interview, Giannoulias pointed out that his family's bank is relatively small and has not taken federal bailout money.
"There's a difference between community banks and large, Wall Street institutions," he said.
Giannoulias said he now owns 3.6 percent of the bank and should not be held accountable for financial challenges it now faces because of bad real estate loans.
Much is at stake in the Illinois contest. A Democratic loss of the seat once held by Obama would bring to his adopted home state the embarrassment suffered this month in Massachusetts.
The seat is held by Senator Roland Burris, a Democrat who plans to step down a year from now following a controversial appointment to fill the position in December 2008. The Illinois senate removed Governor Rod Blagojevich from office the following month after federal prosecutors accused him of trying to sell Obama's former U.S. Senate seat.
Cheryle Jackson, a former Chicago Urban League president and former Blagojevich spokeswoman, is also running for the Democratic nomination, as are attorney Jacob Meister an radiologist Robert Marshall.
Giannoulias drew 32 percent of likely Democratic primary voters compared with 20 percent for Hoffman and 18 percent for Jackson, according to a poll taken Jan. 22-25 by Public Policy Polling, the Raleigh, North Carolina-based firm that predicted Scott Brown's defeat of Coakley in Massachusetts. The Illinois poll had a margin of error of 4.9 percentage points.
Top Illinois Democrats dismissed suggestions that his ties to banking could be used by Republicans in a general election.
"He's faced this when he first ran for treasurer and addressed it," said Senator Dick Durbin of Illinois, the chamber's No. 2 Democrat.
Obama's campaign committee for his successful 2004 U.S. Senate run banked at Broadway. He endorsed Giannoulias in 2006 for his current job and the two have played basketball together, including on Election Day. Giannoulias helped Obama tap Chicago's Greek-American community for campaign contributions during his U.S. Senate and presidential bids.
The senate seat is one of six now held by Democrats that is rated as a "toss up" by the non-partisan Cook Political Report in Washington. Polls show Illinois Congressman Mark Kirk heavily favored to win the Republican primary.
While the White House tried to convince Illinois Attorney General Lisa Madigan to run for Senate, David Axelrod, a senior adviser to the president, told reporters Jan. 25 that Obama and the White House will be "fully supportive" of whoever is the Democratic nominee.