Hypocrisy: Giannoulias wants banking crackdown--but what about Broadway Bank?

Three years ago I listened to Alexi Giannoulias on WBBM-AM's "At Issue" program where he repeatedly stated, "We need a banker as Illinois Treasurer." The political novice, who never voted in an election until his name was on the ballot, was a loan officer at his family-owned Broadway Bank.

One state fund, a college savings program called Bright Start, lost nearly 40 percent of its value last year. But Giannoulias' office used Bright Start funds to purchase a $26,000 SUV.

So much for having a banker as state treasurer...

But "The Boy Banker" was talking tough today--taking on familiar fiends such as derivatives traders and mega-banks, as Crain's Chicago's Business reports:

At a press conference, Mr. Giannoulias said non-bank lending institutions should face the same oversight rules that govern banks, with all over-the-counter derivative transactions taking place only on new public exchanges.

Banks themselves should have to raise more capital, and large banks should have to contribute $150 billion to $200 billion over the next decade to create a federal bail-out fund for future financial emergencies, the Chicago Democrat said. And a new consumer agency should regulate home loans, credit card fees and payday loans, he said.

But he immediately was hit with questions about Broadway Bank, which faces huge defaults on loans for high-profile real estate deals, many of them out of state, even though Broadway is considered a neighborhood institution.

"You saw greed everywhere," Mr. Giannoulias said in response to a question about Broadway. A moment later, he conceded that he personally approved loans for projects in Florida, New York and other states. But "hundreds" of community banks are dealing with similar woes that have driven many of them to insolvency, he added.

Broadway Bank is not weathering the financial crisis well, and Giannoulias was asked about some big cash payouts, as Bloomberg tells us:

He also defended $70 million in dividends paid by the bank holding company in 2007 and 2008 to family members, weakening its balance sheet.

"Most of it was used for income-tax purposes," he said. "A lot of those dividends were used to help settle the estate of my father."

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