Marathon Pundit: Banking headaches for Alexi Giannoulias and kin

Even before Crain's Chicago Business went sniffing around Broadway Bank, state and national Democrats were nervous about the prospect of Alexi Giannoulias as the party's nominee for Barack Obama's old Senate seat, which is currently occupied by Roland Burris (D-Blagojevich). The White House was said to be recruiting state attorney general Lisa Madigan--who has decided to seek a third term. Local Dems were pursuing Merchandise Mart CEO Chris Kennedy, a son of RFK.

Here is what has them nervous:

The family of state Treasurer and U.S. Senate candidate Alexi Giannoulias pulled $70 million out of its Broadway Bank in 2007 and 2008, just as Broadway's high-octane growth strategy collided with the housing meltdown that has now put the lender's future in question.

Surging loan defaults are hammering Broadway, which grew rapidly to more than $1 billion in assets in the past five years and consistently ranked at the top of Crain's list of the most profitable local banks. By one measure, Broadway now is the second-weakest bank of its size in the Chicago area.

Without a substantial injection of new equity capital, Broadway could be fighting for survival and facing regulatory action during the heat of Mr. Giannoulias' Senate race next year. On his Web site, the Democrat touts his experience as a former banker at Broadway.

In an e-mailed statement, Chief Financial Officer Kaushik Pancholi says, "Like virtually every bank in this challenging environment, Broadway Bank is exploring capital options. We are confident, however, that the bank will return to profitability and remain adequately capitalized even in the absence of an additional capital infusion."