ALEXI’S LITTLE DIVIDEND

2/7/10

Making political predictions is always precarious, especially for me. (See my 2/1/10 post ("YOU KNOW HOW THE PREMIER LIKES SURPRISES..."). It is especially perilous to make predictions involving people like Democratic lieutenant gubernatorial nominee Scott Lee Cohen, who appears to have a rather tenuous grip on reality. So while it looks like Mr. Cohen will be “persuaded,” probably with generous offers of help in paying down campaign, and other, debts from the state Democratic Party, to leave the ticket, we can never be too sure.

But let’s assume that Mr. Cohen does drop out and the Dems nominate, say, Art Turner, as their candidate for lieutenant governor. That eliminates only one problem; the problem at the top of the ticket would remain. Alexi Giannoulias is going to present big difficulties for the Democrats, and most of those challenges do not involve his mistaken belief, shared by most Democrats, that Barack Obama’s election, and the installation of a Democratic congress in 2006, came about because the electorate yearns and pines for the full Democratic jacket of an always inclusive, all encompassing, Democratic womb paid for with the seizure of both their incomes and wages for distribution as Nancy Pelosi and Barbara Boxer see fit. The Dems are in control on the national level because the public was understandably and rightly repulsed by George Bush, who was, after all, only a minisculely milder version of Barack Obama, without the brains, the charisma, or the work ethic, but that is another issue. Assuming that the Dems’ victories in 2006 and 2008 were anything more than a backlash against the current leader in the “Worst President of All Time” contest is dangerous, but the Dems apparently fear no danger. But I digress.

There’s always time for one more digression, however, especially in the Insightful Pontificator. In his speech, when he was addressing HartMarx’s wanting to close one of its plants in Illinois and his (admirable) efforts to keep HartMarx here, Mr. Giannoulias used the expression “If you want to do business in Illinois….” and then listed a laundry list of political whims to which businesses must cater. What he should have said, and what he may have meant to say, was “If you want to do business with Illinois…,” especially because the pressure he, as State Treasurer, brought to bear on HartMarx involved influencing its banks through manipulation of state deposits. There is a HUGE difference between influencing people who want to do business with the state and bullying people who want to do business in the state. That young Mr. Giannoulias used “in” when he should have said “with” says a lot about Mr. Giannoulias’s view of the proper roles of government and business or of government and private economic players of any kind. And, no, I’m not picking nits...people’s choice of words means a lot, especially to those of us who spend so much time choosing words. But, again, I digress.

No, Mr. Giannoulias’s problems will arise not so much from his policy stances, which have proven to be quite flexible in any case, but, rather, from his family’s ownership of Broadway Bank and his deep involvement with the bank. Yes, there were the close and extensive relationships between the bank and Tony Rezko and the even more nefarious Michael “Jaws” Giorango, the Mob enforcer and massage parlor protector/owner turned real estate baron with the help of his friends at Broadway Bank. While those are problems, the GOP would do well to avoid dwelling too hard on things like financial double-dealing and involvement with shady characters in this one party state. The larger problem will turn out to be the $70m the Giannoulias family took in dividends from Broadway Bank in 2007 and 2008 in the wake of the death of Mr. Giannoulias’s father. Normally, one would say that the bank was the family’s bank and that the owners of the bank are entitled to take dividends from it. However, this particular bank is in serious trouble and may be on the verge of a government sponsored, and financed, takeover by a stronger financial institution, or, in other words, of a government bailout.

Alexi Giannoulias counters that many banks are in similar trouble, so what’s the big deal? For starters, would $70mm have helped shore up the bank’s capital base? Where did the $70mm, several million of which ended up in young Alexi’s pocket, go? Since money is a fungible commodity, it is not only fair, it is absolutely right, to say that some of it went to finance Mr. Giannoulias’s campaign for senator. So, connecting the dots, the taxpayers may wind up bailing out a bank that might have remained financially solvent were it not for a huge dividend, a portion of which financed a politician’s campaign for the Senate. Therefore, it looks very much like, if Broadway Bank is bailed out with taxpayer money, the taxpayers will have ended up financing young Alexi’s latest excellent adventure. While some people profess unbridled enthusiasm for public financing of political campaigns, I don’t think this is what they had in mind.