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

April 24, 2010

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 felonswhile 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.”

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.

Giannoulias continues to dodge questions about his time at the bank. As I noted in February, he won the Democratic primary despite Broadway having received a rebuke from FDIC just days before the election.

Now that the bank has officially been seized, it will be a tougher topic to avoid. Hopefully Democrats will lean on Giannoulias to quit the race. He has no business being there in the first place.

——

Here’s the run down of tonight’s failures:

#51

–Failed bank: Amcore Bank, National Association, Rockford IL
–Regulator: OCC
–Acquiring bank: Harris National Association, Chicago IL
–Transaction: loss share covering $2.0 billion of assets
–Vitals: assets of $3.8 billion, deposits of $3.4 billion
–Estimated DIF damage: $220.3 million

#52

–Failed bank: Broadway Bank, Chicago IL
–Regulator: IL Dept of Financial and Professional Regulation — Division of Banking
–Acquiring bank: MB Financial Bank, National Association, Chicago IL
–Transaction: loss share on $878.4 million
–Vitals: assets of $1.2 billion, deposits of $1.1 billion
–Estimated DIF damage: $394.3 million

#53

–Failed bank: Citizens Bank&Trust Company of Chicago, Chicago IL
–Regulator: IL Dept of Financial and Professional Regulation — Division of Banking
–Acquiring bank: Republic Bank of Chicago, Oak Brook IL
–Transaction: Republic pays small premium for deposits, FDIC retains assets
–Vitals: assets of $77.3 million, deposits of $74.5 million
–Estimated DIF damage: $20.9 million

#54

–Failed bank: New Century Bank, Chicago IL
–Regulator: IL Dept of Financial and Professional Regulation — Division of Banking
–Acquiring bank: MB Financial Bank, National Association, Chicago IL
–Transaction: loss share on $429.1 million of assets
–Vitals: assets of $485.6 million, deposits of $492.0 million
–Estimated DIF damage: $125.3 million

#55

–Failed bank: Lincoln Park Savings Bank, Chicago IL
–Regulator: IL Dept of Financial and Professional Regulation — Division of Banking
–Acquiring bank: Northbrook Bank and Trust Company, Northbrook IL
–Transaction: loss share on $141.5 million of assets
–Vitals: assets of $199.9 million, deposits of $171.5 million
–Estimated DIF damage: $48.4 million

#56

–Failed bank: Peotone Bank and Trust Company, Peotone IL
–Regulator: IL Dept of Financial and Professional Regulation — Division of Banking
–Acquiring bank: First Midwest Bank, Itasca IL
–Transaction: loss share of $57.5 million of assets
–Vitals: assets of $130.2 million, deposits of $120.0 million
–Estimated DIF damage: $31.7 million

#57

–Failed bank: Wheatland Bank, Naperville IL
–Regulator: IL Dept of Financial and Professional Regulation — Division of Banking
–Acquiring bank: Wheaton Bank & Trust, Wheaton IL
–Transaction: loss share on $300.2 million
–Vitals: assets of $437.2 million, deposits of $438.5 million
–Estimated DIF damage: $133.0 million

Comments

7 bank failures in Illinois only on 04/23.
Here is the list and graph of bank failures :
http://portalseven.com/banks/Failed_Bank s_List_2010.jsp

About todays bank failures :

Total Assets of failed banks = 6.33 billion
Total Deposits of failed banks = 5.80 billion
Total number of branches of failed banks = 73
Total cost to DIF = 973.9 million

Check more on bank failures at:
http://portalseven.com/banks/

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