A Symbolic Senate Seat

WaPo looks at the Illinois race, among others.

I'd say it's the Obama/Blago/Burris Senate seat. Dems continue their scandal-plagued tradition with Obama buddy Alexi Giannoulias.

Republicans offer something different. Illinois is burdened by rampant corruption, equivalent by some estimates to a tax of as much as $500 million, and the state's already bankrupt--the direction the country is going.

Some new questions for Alexi from the Kirk campaign:

Experts Contradict Alexi’s Spin

FDIC Discount Further Erodes Giannoulias’ Story

Alexi Giannoulias continues his attempts to elicit sympathy for his reckless decisions that brought down his family bank and cost the FDIC $394 million, saying Broadway was an ordinary bank victimized by a bad economy.

The problem for Alexi? Banking experts and new information contradict his spin.

In interviews this week the President of MB Financial – who purchased Broadway Bank after its collapse – revealed that the FDIC was forced to offer a 20 percent discount to sell the toxic bank. [1] This amounted to a $171 million payment from the FDIC to MB Financial. [2]

By contrast, MB Financial purchased an apparently healthier New Century Bank the same day at only a 9 percent discount. [3]

Why the discrepancy?

The difference between the two discounts is due to two factors. First, as bank analyst Dennis Klaese put it: “The deposit franchise at Broadway clearly was a very poor one.”[4] Broadway Bank was heavily dependent on expensive and volatile brokered deposits, and thus MB Financial was only interested in acquiring $281 million of Broadway Bank’s $1.1 billion in deposits.

On the other hand, MB Financial acquired $471 million of New Century Bank’s $492 million in deposits.[5]

Second, Broadway Bank’s loan portfolio is extremely poor, with a heavy emphasis on commercial real estate and construction and development loans that are unlikely to improve in the weak real estate market.

According to Washington D.C. banking consultant Bert Ely “the real question is why it [Broadway Bank] wasn't closed a long time ago.” Ely went on to sum up Broadway Bank by simply saying “It was a badly run bank.”[6]

There are unanswered questions about Broadway Bank and how it got to this point that Alexi will have to answer as his campaign moves forward.

• Why did the FDIC have to offer a nearly 20 percent discount in order to find a buyer for Broadway?

• Why did brokered deposits grow fourfold and risky construction and development loans rise to 45 percent of the bank's portfolio while Alexi was Chief Loan Officer?

• Did Alexi Giannoulias pull his campaign funds out of Broadway before it failed?

• The FDIC only insures up to $250,000. Given the deadline imposed by the FDIC, did Alexi change banks to protect his campaign cash, or did he leave it at Broadway because he had advance knowledge that the bank would be acquired?

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[1] MB stands ready to buy additional failed banks, Chicago Tribune, April 27, 2010

[2] MB Financial's instant gain on Broadway, New Century: $30 million, Crain’s Chicago Business, April 26, 2010

[3] ibid

[4] ibid

[5] MB stands ready to buy additional failed banks, Chicago Tribune, April 27, 2010

[6] Who Killed Broadway Bank?, Chicago Tribune, April 26, 2010