The clock is ticking, and the real estate deals gone south are piling up, at Broadway Bank, the lending institution owned by the family of U.S. Senate candidate Alexi Giannoulias.
Many U.S. banks are struggling amid the worst financial crisis since the Depression. Almost monthly, at least one Illinois lender has collapsed, seized by the government because of poor performance, often due to real estate loans turned sour.
At once-successful Broadway, headquartered in a former car dealership in the
Edgewater neighborhood of Chicago, the situation has turned awful at an inopportune time for the Illinois treasurer. Less than a week before Giannoulias' Democratic primary election victory earlier this month, the scope of the problems at Broadway became clearer after a regulatory order was made public saying the bank has just three months to get its financial house in order.
Giannoulias has several problems as he heads into the primaries vis a vis Broadway Bank, the bank owned and operated by his family. First, the bank is on the verge of being taken over by regulators. Unless Broadway raises roughly $75 million it will be taken over by regulators. The problems stem almost entirely from bad real estate loans. From 2002-2006, Alexi Giannoulias was the chief loan officer at Broadway Bank. As such, he was singularly most responsible for generating real estate loans for Broadway Bank during the height of the boom. Now that boom has turned to bust, so too have many of these loans. Here's how Broadway Bank broke down the numbers.
Of Broadway's more than $240 million in seriously delinquent loans and foreclosed real estate, Demetris Giannoulias said, 9 percent of the value of those deals originated during Alexi Giannoulias' tenure as the bank's chief loan officer from 2002 through 2006, when he left to successfully run for state treasurer.
That would put most of the responsibility on his successors at the bank. The more general problem is that Giannoulias' experience amounts to his time at the bank and four unremarkable years as the State's Treasurer. He spent six years being a loan officer during the height of the real estate boom. That's the sum total of his accomplishments. Giannoulias comes from a powerful and well connected family. That more than anything is the reason that at 33 he's on the cusp of being a U.S. Senator. That's not the profile that makes for a good candidate this year.
Finally, there are the loans made by Giannoulias himself to reputed member of the Outfit (the name of the Mafia in Chicago) Michael Giorango. One of those, a property in Florida, is currently in default. The optics on those loans certainly don't look good. Those loans were the subject of several ads by opponents when he ran for Treasurer in 2006. Look for that issue to appear again in this cycle.