Democratic U.S. Senate candidate David Hoffman accused rival Alexi Giannoulias yesterday of failing to accept responsibility for decisions "made under his watch" at the beleaguered Broadway Bank.
This week, the Federal Deposit Insurance Corporation and the Illinois Department of Financial and Professional Regulation imposed new restrictions on the Chicago bank in an attempt to right its course and save it from collapse.
Giannoulias responded to the consent order by saying he has not been at the bank, where he was formerly a senior vice president, for four years, and that its problems stem from broader economic trends.
In a meeting with media yesterday, Hoffman dismissed that defense.
"It is simply not true," Hoffman said. "It is spin. It is not honest."
Hoffman, the former Chicago inspector general, is running behind Giannoulias in polls.
He argued that during Giannoulias' tenure, Broadway Bank assumed enormous risk by doing business with shadowy figures such as Tony Rezko, now in federal lockup, and by lending to commercial-real-estate investors with speculative developments in Florida, the site of a major housing boom gone bust.
"Broadway Bank has not been acting like a community bank for years," Hoffman said. Rather than stick with conservative financial principles, the bank went for the "big score."
Broadway scored big indeed. Several years ago, it was one of the most profitable banks in Chicago. In 2007 and 2008, the Giannoulias family pulled out $70 million in dividends reaped from an aggressive growth strategy.
But high rewards turned into losses, and as the housing crisis struck, Broadway found itself in the same straits as major subprime lenders.
The new regulations from the FDIC and state regulators include a requirement that Broadway add $19 million to its reserves and raise about $50 million in capital to avoid a federal takeover.
State Sen. Susan Garrett, joining Hoffman at the media conference yesterday, said Giannoulias' role in the bank merits a serious investigation. She emphasized that he is not just a former bank executive, but also the state's treasurer.
"Who knows what we'll find out next week or the week after?" Garrett suggested. "He has to come under full scrutiny. He has to come clean."
Kati Phillips, campaign spokeswoman for Giannoulias, did not expand on the treasurer's previous responses to the consent order or Hoffman's statements.