Bank failure Friday: 7 in Illinois, one tied to Obama

[FarCenter]

Apr 23, 2010 21:41 EDT
FDIC may be using up all available hotel rooms in Chicago this weekend as it closes five banks in the city and two others elsewhere in Illinois.

But the big news is that one in particular has close ties to the whippersnapper Democratic candidate for IL’s U.S. Senate seat, and peripheral ones to President Obama. The Senate Candidate, Alexi Giannoulias, was an executive at Broadway Bank, owned by his family. While he was there, the bank morphed into an aggressive commercial real estate lender, funding itself primarily with high interest-rate brokered deposits.

Using brokered deposits to expand quickly in CRE is a common recipe for failure ever since the S&L crisis.

Most interesting are the characters that Broadway lent to. The Chicago Tribune reported earlier this month that it had lent $20 million to two known felons … while Giannoulias was a senior loan officer.

It’s a must read story:

Shortly after Broadway began lending money to a Chicago firm the pair formed, Giorango and Stavropoulos used that company to launch their own lending business and make more than 40 short-term loans to borrowers who might not qualify for traditional bank financing, the Tribune found. Such so-called hard-money loans are typically riskier than long-term mortgages offered by banks.

Broadway officials say they were unaware of the pair’s lending operation and believe the bank’s loans were used solely to fund real estate purchases. They acknowledged they did not inspect or audit the company’s business records, though Broadway’s loan provisions allowed the bank to do so.

They were lending millions to these guys and they didn’t even know where the money was going?!?

In a two-hour interview this week with the Tribune, Giannoulias’ older brother, Demetris Giannoulias, the bank’s president and CEO, said he established Broadway’s relationship with Giorango in the mid-1990s. Giorango began investing in Chicago properties after completing two federal prison stints for running bookmaking schemes….

Demetris Giannoulias said the bank learned of Giorango’s bookmaking and prostitution promotion convictions from a spring 2004 Tribune report detailing those cases.

“But we’re a relationship bank,” he said. “So somebody comes in and in all his dealings with the bank seem to be on the level, everything makes sense, nothing seems illicit or untoward. Just because somebody gets a bad article written about them there’s no reason to say, ‘Hey, listen, I’m going to kick you out the door because you don’t win a popularity contest.’ We didn’t think he was doing anything illegal.”

<SNIP>http://blogs.reuters.com/rolfe-winkler/2010/04/24/bank-failure-friday-7-in-illinois-one-tied-to-obama/

[FrenchieCat]

1. one tied to Obama how?

I'm trying to go with you on this,
but I'm not getting there.

What Am I missing? :shrug:

[FarCenter]

3. The story continues at the link --

Alexi Giannoulias happens to be an old basketball buddy of the President and his is just the latest seedy story in Chicago politics. He was elected state Treasurer at 29 thanks to an endorsement from then Senate candidate Barack Obama. His only experience had been at Broadway.

How did he get elected Treasurer? Because Obama endorsed him. Why did Obama endorse him? Because the Giannoulias family had been big financial supporters for Obama’s Senate campaign (Alexi continued his financial support for presidential candidate Obama).

Another well-known felon also got loans from Broadway: Tony Rezko.

[sandnsea]

2. Does this not get posted daily??

I bet you've lost count of how many times you've posted it yourself.