Politics did not delay federal bank regulators’ closing of Broadway Bank in Chicago, an institution owned by the family of Alexi Giannoulias, a federal watchdog said today. Giannoulias is a Democratic candidate running for President Barack Obama’s former Senate seat.
The Federal Deposit Insurance Corp. and Illinois regulators shut Broadway Bank on April 23, 2010, three months after ordering the bank to raise capital, cut dividends, and boost its allowance for loan losses. Rep. Darrell Issa, the top Republican on the House Oversight and Government Reform Committee, asked the FDIC inspector general to examine if the bank’s April 2009 examination, January 2010 enforcement order, and April 2010 closing were delayed for political reasons.
“Nothing came to our attention to suggest that FDIC officials or the FDIC examination, enforcement action, or closing processes were subject to any political or inappropriate influence,” the inspector general report said. In fact, Illinois bank regulators said they made the enforcement order public earlier than usual – on Jan. 26 – because of the state’s primary election on Feb. 2.
The inspector general also reviewed emails and calendar meetings of bank officials and said there was no sign of political influence by the administration or Congress. Broadway Bank’s collapse cost the FDIC’s insurance fund about $394 million.
Alexi Giannoulias was a senior loan officer at his family’s Broadway Bank before he was elected Illinois state treasurer in 2006. Some polls show Giannoulias tied with Republican Mark Kirk ahead of the November election to fill the senate seat.
Quick Fact: FDIC examiners have five ratings for banks ranging from “well capitalized” for the healthiest institutions down to “critically undercapitalized,” which requires the agency to appoint a receiver within 90 days. At the time of its failure, Broadway Bank was ranked one step from the bottom as “significantly undercapitalized.”
Other new reports released by the Government Accountability Office (GAO) or various federal Offices of Inspector General (OIG):
- IRS “ineffective” in overseeing contractors awarded $78.5 million in federal stimulus funds (OIG)
- U.S. AID’s Cairo office should designate an environmental officer to monitor the impact from $150 million infrastructure projects in the region (OIG)
- Medicare wrongly spent $43.3 million for “less than effective” drugs in 2006-07 and should be reimbursed by Part D sponsors (OIG)
- Medicare spending on epidural injections to treat back pain jumped to $141 million in 2007, up 150 percent from 2003, but one-third of the treatments should not have been paid (OIG)
- Back disorders, diabetes, and degenerative joint disease are disabilities often denied by local Social Security Administration officials, then allowed on appeal (OIG)
- GAO proposes periodic revisions, updates in its “Yellow Book” of U.S. government auditing standards (GAO)
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