In mid-November, Alexi Giannoulias held a Sunday-morning news conference at Flashpoint Academy, a digital-arts school in the Loop, to announce that he was being endorsed for the U.S. Senate by Congresswoman Jan Schakowsky. It wasn't a surprising development—Schakowsky has been a mentor and a key ally to Giannoulias since his political debut in 2006, when he ran successfully for state treasurer—but the event was choreographed as if it were big news. Campaign workers greeted people in the lobby and directed them to the elevators a few steps away; others waited to catch them as they stepped off the elevators on the fifth floor. Dozens of chairs were set up in the room where the announcement was to be made, and a video camera was ready to capture it for YouTube.

By a few minutes past 11:30, the scheduled start time, about 20 of Giannoulias's supporters had assembled, including the campaign staffers and his mother. But the only media who'd shown up were me and a couple cameramen from local TV stations.

In strode a smiling Schakowsky and Cook County commissioner Larry Suffredin, followed by Giannoulias, a six-two, 33-year-old former basketball player and banking exec. His hair was fashionably mussed as usual, but he wore a conservative dark suit—American flag pin on the lapel—and a look of deliberate seriousness. After Suffredin introduced Schakowsky, she stepped to the podium and reminded everyone that she'd been one of Giannoulias's first backers. Since then, she said, he'd shown that he had the "courage" to "stand up" to special interests, health insurance companies, and greedy banks—just what was needed in Congress. "I think he is by far and away the best candidate to retain President Obama's seat," Schakowsky said.

In touching on America's newfound suspicion of the banking industry, Schakowsky inadvertently highlighted the issue that's played a far bigger role in Giannoulias's campaign than his positions on health care reform, job creation, or financial regulation: his family's business, Broadway Bank.

Four years ago Giannoulias was a 29-year-old officer at the bank, and known in political circles—if at all—as the guy who'd helped Barack Obama raise lots of money in the Greek community. Then Obama paid Giannoulias back, endorsing him in TV spots that propelled him to a come-from-behind win in the 2006 Democratic primary for treasurer. Victory transformed him into a promising young progressive with big prospects—until the media began reporting that Broadway Bank had given a series of loans to figures involved in organized crime or political corruption. Even as Giannoulias triumphed in the 2006 general election, critics accused him of being inexperienced, slick, and "ethically challenged."

Now, after serving as treasurer for less than three years, Giannoulias thinks he's ready to move up to the Senate, and Schakowsky (whom some progressives wish were running in his stead) is one of dozens of elected officials and union leaders saying yes he can. The stakes are high: Democrats can't lose a single Senate seat next year and keep their filibuster-proof majority, and the office Obama held before he was elected president would be a prize for the Republicans.

There's little doubt what the biggest issues are: voters are angry and distressed about the economy, and, to a lesser extent, waste and corruption in government. While Giannoulias and his campaign team are betting that his progressive politics, reform efforts in the treasurer's office, and ideas for creating jobs will resonate, his opponents are talking a lot about Broadway Bank's aggressive lending policies and trying to force Giannoulias to talk about them too. They'd like nothing better than to turn his candidacy into a referendum on the high-risk growth strategies that propelled the banking industry toward catastrophe.

Once Schakowsky was through, Giannoulias stepped to the podium, looked directly into the cameras, and praised her in a gracious tone that sounded less like political backslapping than a polite thank-you to the aunt who sent you a new basketball for your birthday. Then his warmth gave way to a cool, controlled indignation as he took a couple swipes at the opposition.

To capture the Democratic nomination on February 2, he needs to beat former Chicago inspector general David Hoffman, Chicago Urban League president Cheryle Robinson Jackson, and attorney Jacob Meister, but Giannoulias, the leader in polls, name recognition, and fund-raising, apparently believed he had the luxury of ignoring them. He fired away instead at Republican front-runner Mark Kirk. Democrats believe they can portray the North Shore congressman as an erstwhile moderate who's abandoning "working families" as he shifts to the right, and Giannoulias noted that Kirk had accepted more than $320,000 in campaign contributions from insurers. "If you pay your premiums your insurance company should cover you—no exceptions, no caps, no limits," Giannoulias said. "Mark Kirk disagrees. He believes in protecting insurance companies, not protecting people."

Giannoulias thanked everyone for coming. As the cameramen packed up, he was loose and jovial, circulating around the room offering handshakes and hugs and making wisecracks. For once, nobody had asked about the bank.

Giannoulias's father, Alexis, immigrated to Chicago from Greece in 1961, when he was 26, and married his wife, Anna, also Greek, seven years later. He sold pickles and took on other odd jobs before finding a niche in real estate as a developer of banquet halls and neighborhood shopping centers. In 1979 he founded Broadway Bank. The institution grew quickly, lending first to neighborhood businesses and then to commercial real estate developers around the country. By 2001 it had about $335 million in assets and was ranked one of the fastest-growing community banks in the Chicago area. The family also ran a real estate business, United Investors.

Alexi was born in 1976, the third of three boys. He says he practically grew up in the bank, hanging around the office as a kid and working there in the summer and on breaks during high school and college.

Like his older brothers, Alexi attended the prestigious Latin School, where he developed into a star guard on the high school basketball team, known for his three-point shot.

He wanted to play college ball. "I was small and slow, so I thought maybe I could play in the Ivy League," he says. "But I'm really close to my family, and my mom got cancer that year and I decided to stay home and be near her."

He enrolled at the University of Chicago and became one of the basketball team's scoring leaders. But as his mother got better, Giannoulias started thinking about how much he wanted to play in the Division I NCAA tournament, which he'd watched avidly every year since he was a little kid. ("The first championship I remember is when Keith Smart hit the jumper to win it for Indiana" in 1987, he says.) His older brother George was already in Boston, so Alexi got in touch with the coach at Boston University and decided to transfer there for his last two years. It worked out as he'd hoped: Giannoulias got a lot less playing time than he had at the U. of C., but during his junior year the Terriers went 25-4 and won the American East Conference tournament before losing in the first round of the NCAAs to Tulsa.

After graduating in 1998, Alexi played pro ball for a year in Greece, then enrolled in law school at Tulane. His JD in hand, he returned to Chicago and took a job as a loan officer at Broadway Bank. Within two years he'd been named senior loan officer and a bank vice president.

It's not clear what responsibilities came with these titles. He's said that as VP he oversaw all of Broadway's lending—but he's also said he was really just the guy who serviced the bank's loans—overseeing things like billing and payment collection— while more senior officers, including his older brother Demetris, negotiated the deals and made the final decisions. When I pressed him to specify his job descriptions at each stage of his employment at the bank, he laughed.

"You have to understand that it was the family business—I did everything there," he said. "Sometimes I was a teller and sometimes I serviced loans—whatever we needed."

Banking industry experts say banks used to put employees through a couple years of training before giving them the responsibility of making loan decisions. "It was a standard—you would be trained and then you would be mentored in different parts of the bank before being sent out as a loan officer," says Michael Iannaccone, president of MDI Investments, an Oak Park-based banking consulting firm. But banks started relaxing that standard during the real estate boom earlier this decade.

Broadway was one of hundreds of banks around the country that profited greatly from that boom and kept it going with aggressive lending policies. From 2002 through 2006 its assets more than doubled, from $434 million to $946 million, and Crain's Chicago Business ranked it the most profitable bank in Illinois (by figuring its income as a percentage of its assets) for four years running.

"People think there's some kind of magic to it," Alexi told Crain's in 2004. In fact, he said, it was simply the result of hard work and his father's deep roots in the community. "He knows what deals are solid or not solid, what areas are hot or not hot."

But there was at least one additional factor: risk tolerance. Broadway's growth and profits were fueled largely by its rapidly expanding business in issuing loans for new real estate development. Traditionally lending for construction and development (known in the industry as C & D) has been seen as a bigger gamble than lending for, say, existing homes or small businesses, since a relatively high number of plans for new hotels, condos, housing developments, office complexes, and the like end up flopping. In the early to mid-2000s, though, as the soaring real estate markets drove the national economy, many lenders downplayed the risk and dived in.

At the end of 2002, Alexi's first year as a full-time employee, the bank had nearly $80 million in outstanding C & D loans—about 25 percent of its total loan portfolio, according to records filed with the FDIC. By the end of 2006, not long after he'd left the bank, it had $356 million in C & D loans accounting for nearly 46 percent of its loan total. During those years, it was consistently among the 20 banks, out of hundreds its size, with the biggest share of their portfolios tied up in such loans.

Moreover, rather than relying primarily on depositors from the community for its lending money, the bank relied heavily on brokered deposits, or "hot money"—pots of money collected by brokers from investors around the country. Over the last decade scores of banks have used brokered deposits to quickly bolster their cash supplies—but at a cost. These deposits command higher interest rates; furthermore, the depositors are less likely to stick with the bank if they see they can do better somewhere else. "When properly managed, BDs offer institutions a number of important benefits such as ready access to funding," the FDIC notes on its Web site. "However, BDs can be a higher-cost and more volatile funding source and, as such, present potential liquidity, earnings, and other risks that must be properly managed."

In 2002, the ratio of brokered deposits to total assets at Broadway was 53 percent, according to FDIC records; four years later, it had risen to 68 percent. The average for all federally insured banks nationwide was 4.5 percent. According to an explanation of hot money on AOL's Daily Finance in July, "the 79 U.S. bank failures in the last two years had four times the brokered deposits of the average bank, and 33 percent of the failed banks had high brokered deposits and extremely fast growth."

In the early and middle part of the decade, when the economy was thriving, this just meant that Broadway had money to lend. Giannoulias says that it was able to aid countless small businesses and enable important development projects to get off the ground. "We've taken enormous pride in helping people," he says, naming a neighborhood health store and a nail salon. "We have people who've had checking accounts for 25 or 30 years."

But experts and community leaders say Broadway developed a reputation for giving out loans to just about anyone who walked in the door. Among the recipients of loans while Alexi worked full-time at the bank were: Michael Giorango, a Florida developer who's been convicted of running bookmaking and prostitution rings; Boris and Lev Stratievsky, a father-son team later convicted of laundering money for Ukrainian drug dealers; and Tony Rezko, the developer-businessman-political fixer who was eventually convicted of fraud and money laundering for his role in pay-to-play schemes during the administration of Governor Blagojevich. Giannoulias and current bank officials have said all of them were creditworthy when the loans were issued.

Another loan, for $1 million, was issued in 2002 to a woman whose family claims she was suffering from dementia—and that both Alexi, as the loan officer, and his brother Demetris, then the bank's CFO, knew it but gave her the loan anyway. Loren Billings was persuaded by three tenants of her building at 1134 W. Washington to take out the loan so she could invest in a foreign-currency arbitrage account. But bank officials had misgivings. They first requested that she provide additional financial records beyond what she'd initially submitted with her loan application. Then, in a letter to Billings dated September 16, 2002, Alexi suggested that she consult an attorney before signing the loan papers. "The hiring of an attorney is not a requirement," he wrote. But "it is important that you understand all of the intricacies of the loan documents and more importantly that you are fully aware of the potential risks involved with any non-payment or late payment of the loan. Secondly, there is concern on the bank's part due to the past credit history of the other three co-borrowers."



Alexi Giannoulias

Billings provided the backup financial records, some of which contradicted information she'd already submitted, according to court records. But when she didn't heed Alexi's advice to get a lawyer, bank officials took the names of her tenants off the loan and issued it to her alone, listing her building—which included her home as well as the Museum of Holography, which she'd founded in the 70s—as collateral. "Despite my warning, Ms. Billings was determined to go through with the loan, and there was no reason to deny it," Alexi wrote in a 2006 letter to the Sun-Times, responding to a story about the loan.

Billings turned over most of the money to her tenants and saw no return on her investment. When Billings's son, Terrence Kasprzak, sued the bank in 2006, Alexi intimated that Kasprzak was just trying to capitalize on his campaign for treasurer. "Why is Kasprzak suddenly voicing concerns about his mother's mental capacity four years after the loan was granted and when I'm currently seeking a statewide office?" he wondered. A Cook County judged ruled in favor of the bank in March 2008; Kasprzak appealed and the suit is currently pending in state appellate court.

At the time these loans generated little attention, and the bank continued to make headlines for its success. In 2006 it was the fifth-most profitable community bank in the country, and on the surface its management decisions appeared to be sound. Loans that had "gone bad," meaning those with payments at least 90 days past due, didn't make up even half a percent of the total value of its portfolio—and the bank had reserves on hand to cover them. Like hundreds of other profitable banks, it saw no reason to change its loan or deposit strategy.

Yet Iannaccone, the banking consultant, thinks it should have proceeded with caution. "Even in 2006 and 2005 everyone knew that real estate wasn't going to keep going up 10 percent a year," he says. "And they were in high-risk loans."

In 1998 Giannoulias met state senator Barack Obama playing pickup basketball at the University of Chicago rec center. In addition to Obama's competitive fire ("He'll stack the teams so he's with the winner," he says), Giannoulias says he was impressed by Obama's smarts, friendliness, and passion. The two became friends, hoops buddies, and, most significantly, political allies.

Five years later, when Giannoulias moved back to town to work at the bank, Obama was getting ready to run for the U.S. Senate. That April incumbent Peter Fitzgerald, a Republican whose aloofness and independence alienated colleagues in both parties, announced that he wouldn't run for reelection. With the Republican Party already reeling from corruption scandals under former governor George Ryan, Democrats believed the seat was theirs to reclaim.

But Obama was not the favored candidate. His last attempt to move up the political ladder, in a 2000 congressional primary, had ended in a crushing defeat, and the declared candidates in the Democratic primary for the Senate seat included state comptroller Dan Hynes, son of 19th Ward political boss Tom Hynes; Blair Hull, a billionaire businessman willing to spend whatever it took; Gery Chico, a lawyer who'd formerly served as school board president and chief of staff to Mayor Daley; and Maria Pappas, the quirky Cook County treasurer who was counting on tapping the loyal Greek business community for resources.

Still, the Obama campaign believed he could win on charisma, intelligence, and opposition to the war in Iraq—if he could only raise enough money to let people know who he was.

Giannoulias believed that too. Friends say he talked up Obama long before there was any buzz about him. "I remember people asking him, 'Wait, who is this Barack guy?'" says Sean Conlon, a Chicago-based real estate developer and consultant. "He came back to town and got interested in this Obama phenomenon," adds county assessor Jim Houlihan, who's known Giannoulias since he was in high school, where he was buddies with Houlihan's son. "It reminded me of Kennedy—he grabbed my generation like Obama grabbed this one."

Giannoulias didn't just go around saying nice things about Obama—he raised money for him. He introduced him to donors in the Greek community, starting with his own family. Alexis Giannoulias hardly had a record of supporting liberal Democrats—he'd donated to the campaign of former Republican governor George Ryan and the National Republican Campaign Committee—but at his son's behest he contributed $2,000 to Obama's Senate bid. Alexi's brother George kicked in another $2,000, and Alexi himself added $5,600. On top of that, Alexi hosted fund-raisers and made contacts that netted Obama's campaign another $100,000.

Obama, of course, went on to victory in the primary, delivered the electrifying keynote address at the 2004 Democratic convention, and in the fall coasted to a general election victory. By that time Giannoulias had the political bug. "Barack taught me that if smart, capable people want to get into politics they can make a difference," he says.

Obama appears to have politicized Giannoulias. He'd never run for anything, never been a member of a political organization, never worked on a campaign. "He wasn't very public at all until he started to run for office," says a north-side community activist who didn't want to be named because of ongoing relationships with Giannoulias's family and Broadway Bank. "He didn't go to any community events. He had no policy experience. Then all the sudden he started talking about public service."

But Giannoulias had some advantages. He was bright, he had people skills, he had money, and through the bank he already had some political connections. Secretary of state Jesse White and alderman Walter Burnett both had accounts at the bank—as did Obama, for that matter. His family knew most of the elected officials on the north side and had contributed to a number of their campaign funds—recipients included White, Schakowsky, Blagojevich, state reps Harry Osterman and Dan Burke, Cook County Board president John Stroger, county commissioners Forrest Claypool and Roberto Maldonado (now alderman of the 26th Ward), county Board of Review commissioner Joe Berrios (now chairman of the Cook County Democratic Party), and aldermen Burt Natarus and Manny Flores.

In the fall of 2005 Giannoulias set his sights on the state treasurer's office, whose Republican incumbent, Judy Baar Topinka, was preparing to run for governor. Though most of the people who'd held the office didn't have a banking background, Giannoulias figured he could present his as an asset. The only problem was that state Democratic chairman Michael Madigan had already slated a candidate, Knox County state's attorney Paul Mangieri.

Giannoulias first asked his family and friends if they'd back him. "He sat down with several of us, including his father and brothers—and I was flattered to be part of the group—and he said he wanted to run," says Conlon. "I thought he was crazy to get into politics, but it's what he wanted to do. I'm not a political creature, but you get this once in a while where people are doing it for the right reasons. He works hard and he makes time for everybody. I believe in Alexi." Conlon donated at least $10,000; the family gave or lent the campaign more than $2 million.

Giannoulias also reached out to some of the elected officials he and his family had supported. Schakowsky says she was impressed from their first meeting. "I always want to know, when young people come to me, if they want to be somebody or if they want to do something," she says. "After a 40-minute conversation I thought he was the kind of guy who really wanted to do something."

Still, Schakowsky says she was "skeptical" when Giannoulias told her he wanted to run for treasurer. "A young guy who wants to start out in a statewide office? I've heard that before," she says. "But I was just immediately taken with him."

Schakowsky was so smitten she served as Giannoulias's political tour guide, taking him with her to events, introducing him around, and offering advice. "Since he was a novice, I wanted him to be talking to and meeting the right people," she says. "I think it's important for people in positions like mine to be looking for the next generation of leaders."

Houlihan agreed to endorse him, and so did Flores; both now boast of being among the first public officials to do so. Obama's backing helped Giannoulias win the endorsements of other progressive Dems, such as Jesse Jackson Jr., who offered to paste photos of the two of them on billboards across the city and south suburbs that he'd reserved for election season. On the other end of the spectrum, old-school alderman Richard Mell, who commands one of the most powerful ward organizations in the city, also appeared at a news conference to endorse him.

Giannoulias was fortunate in other ways too. On top of the money from his family, he raked in thousands of dollars in contributions from real estate developers and Greek business owners, which allowed him to spend amply on TV commercials and mailings. Plus, Mangieri was a conservative Democrat who opposed abortion and had 12 kids, which didn't resonate with many of the liberal voters who dominate Democratic primaries.

But the single biggest factor in the race was Obama's willingness to speak out for Giannoulias on the air—at the time, the freshman senator was one of the most popular politicians in the world. Asked by reporters why he was going to bat for an unknown candidate in a down-ballot office, Obama was frank about wanting to return a favor. "He was critical for me in terms of reaching out to the Greek community, other ethnic communities in the city," he said. "He was there from the start, when people didn't give me a shot."

In a 30-second TV spot, Obama praised Giannoulias in a way that seemed far more personal than the typical campaign sound bite. "He's one of the most outstanding young men that I could ever hope to meet," Obama said as the ad showed images of Giannoulias at a desk, apparently hard at work. "He's somebody who cares deeply about people. He got that from his family. They really exemplify and embody the American dream. . . . Alexi Giannoulias—he's going to be an outstanding treasurer."

On the stump Giannoulias impressed voters with his energy, personal charm, and ethics proposals, such as his promise that if elected he would accept no contributions from contractors with the treasurer's office. Under serious questioning, though, he sometimes faltered. When the Tribune's editorial board asked him how he could address the funding shortfall in the state pension system, Giannoulias said he wasn't sure.

It didn't matter. In a Tribune poll conducted on February 8, he had the support of about 10 percent of registered voters compared with Mangieri's 14 percent. A month later, after the Obama ad started airing, he had 31 percent to Mangieri's 17. On March 21, 2006, Giannoulias won the Democratic primary with 62 percent of the vote to Mangieri's 38 percent.

He didn't have much time to celebrate. Just days before the election, news outlets ran stories about Broadway Bank loans in the 1990s and early 2000s to Giorango, the Florida developer with ties to bookmaking and prostitution—stories prompted by a pre-primary mailer from the Madigan-led state Democratic Party declaring that Giannoulias was "friends" with mobsters. Giannoulias said privacy laws prohibited him from getting into details, but he noted that there was nothing illegal about the loans. "We lend money to people who we trust from a business standpoint," he said at a news conference. "We're a safe and sound financial institution and we run a good business." He added that these loans were irrelevant to his campaign—he'd been in law school when they were issued.

That was true—but Giannoulias himself had overseen a couple of loans to Giorango in 2005, and the Tribune soon dug up records of those. The paper reported that one of those loans had been used to take out a mortgage on a marina in South Carolina that was home to a casino boat. One of the companies with a stake in the boat had been led by a Greek immigrant named Konstantinos Boulis, who'd been murdered in an apparent hit in 2001. The company was then sold to investors that included Jack Abramoff, the Washington lobbyist convicted on federal corruption charges in June 2006, before being sold back to Boulis's nephew, Spiros Naos—who had donated $5,000 to Giannoulias's campaign in December 2005. But the campaign had returned the check in February, when the Daily Herald had written about Naos's connection to Abramoff.

Forced to concede that he'd met Giorango and checked out some of his properties in Florida, Giannoulias continued to downplay his involvement in the loans, saying he'd merely done the paperwork and credit evaluation. "I don't cultivate the relationships," he said. "I don't bring these deals in." He said Giorango had led him to believe the money for the casino mortgage was going toward a condo development, and he emphasized that because banks don't generally run background checks of their borrowers, he had no way of knowing that Giorango had a criminal record.

His general election opponent, Republican Christine Radogno, seized on the controversy, accusing Giannoulias of "an association with organized crime" and questioning what he'd actually done at Broadway. "When it was convenient he was the vice president in charge of loans, but when they became an issue he wasn't involved," she says. The dailies followed up with stories about the Stratievsky loans. Obama said Giannoulias needed to do a better job of explaining the loans to voters. And some Democrats started mumbling that he should drop out of the race.

He didn't, but that fall he remained on the defensive. "In a perfect world, we'd only lend money to the most morally upstanding citizens," he said on Chicago Tonight in October. But "when you have over 10,000 customers, a $950 million bank, there are a handful of customers—not unlike other businesses—who have legal issues, legal issues which are completely unrelated to the conduct of the bank."

Left mostly unexamined during the campaign was whether Broadway Bank's loans to Giorango, the Stratievskys, Rezko, and other troubled developers were anything unusual for a bank of its size and mission. Is it unheard of for banks to give out loans to ex-cons or businessmen involved in illegal dealings?

It certainly wasn't unheard of for these particular people—each one took out multiple loans from other banks before and after their deals with Broadway. But Iannaccone, the consultant, who has 25 years experience as an investment banker and industry analyst, says banks typically know who they're dealing with if they do a proper credit evaluation. "Yes, you could go through every single bank portfolio and find loan files like that. You could go to every bank, even the ones with the top [performance and management] rating, and find loans with information missing.

"But that is the easy statement to make. Remember: when you take out a loan for a house or a car, they call your employer. They check your payroll records. When you take out a business loan, you are supposed to verify that this person has the financial wherewithal to pay them back. A good bank will go out and the loan officer will visit the borrower at the site, ask who their top customers are, talk to the top customers, see what the bill cycle is like. That's what you're supposed to do when you lend. If you don't, and you just take someone's word, that's poor underwriting."

Supporters say that as he struggled to shake the loan flap Giannoulias became a stronger candidate—more confident before the press, more relaxed before the voters, more knowledgeable about the issues. "The turning point was when I saw him do a debate during the campaign," says Houlihan. "It was clear he had some new perspective and energy to bring to the system."

When he wasn't fielding bank-related questions Giannoulias went after Radogno, calling her a "right-wing extremist," and reminded voters that he had an ethics plan for the treasurer's office: if elected he'd accept no campaign contributions from banks because he'd be doing business with some of them as he managed the state's accounts.

That July Giannoulias's father died of a heart attack during a visit to Greece. It was a personal blow to Giannoulias, who still calls his father one of his heroes, but he took his mother on the trail with him and his campaign wasn't set back for long. It turned out that 2006 was another Democratic year, especially in Illinois, where the tattered GOP lost every race for a statewide constitutional office. Giannoulias was part of the wave, defeating Radogno 54 percent to 42 percent.

On January 9, 2007, his first day at his new job, Giannoulias delivered on his campaign pledge to ban contributions to the treasurer from any firm doing business with the office. He also prohibited office employees from donating to the treasurer's political fund. "Trading political money for political favors is a way of doing business that seems ingrained in our system of government," he declared, taking a not-so-subtle swipe at Governor Blagojevich, whose administration was under federal investigation. "It's poisoned the political climate and resulted in the public's distrust of our elected officials. That's wrong."

It was the new treasurer's first move showing his knack for good government and good press. In March he announced that he and Topinka, his predecessor, had worked together to bring in a new manager for Bright Start, the state's college savings program. He said the manager, OppenheimerFunds, would charge lower fees and improve returns. Later that month he came out against Blagojevich's unpopular—and unviable—proposal to raise the state's gross receipts tax, arguing that it would kill business. In June he showed up at the opening of a north-side community center for gays and lesbians, and a few weeks later he held a press conference in Grant Park to introduce a new program called Green Rewards, which offered tax rebates to drivers who traded in their cars for hybrids and other fuel-efficient models—sort of a predecessor to the Cash for Clunkers program. "Hybrid cars use less gas, but they cost more upfront," Giannoulias said. "This will help [drivers] recoup their investment faster while they save money at the pump."

That plan got kudos from Mayor Daley and environmentalists, but the Tribune's editorial board rolled its eyes. "It would be unfair to accuse Illinois Treasurer Alexi Giannoulias of contracting an early-onset case of the disease that ails Blagojevich: government by public relations. Unfair, but tempting. . . . His unveiling this week of a program that makes Illinois taxpayers subsidize the purchase of hybrid vehicles that already are popular strikes us as a classic case of nanny-statism, political opportunism, or both."

Giannoulias's office gave out $2 million in rebates before running out of money and ending the Green Rewards program in May 2008. Over the next year, by keeping up an ambitious public schedule, making sober pronouncements about issues great, small, and previously unheard of, Giannoulias established a higher profile than any treasurer in recent memory. Among other things, he spoke out against bank consolidation that would cause job losses; pressed banks that do business in Illinois to stop charging fees on money transfers for Holocaust reparations; helped start a scholarship program for the children of military personnel killed in the line of duty; moved to sell off a money-losing hotel the state had owned for years; promoted a financial literacy program with Bears quarterback Kyle Orton; and threatened to yank state money out of Wells Fargo accounts if the bank moved to liquidate Hartmarx, the bankrupt but esteemed Chicago-based suitmaker. Even when the pension reform plan he floated in December 2008 didn't go anywhere because of a deadlocked legislature and trouble in the governor's office, Giannoulias was praised for trying to confront one of the most serious and challenging issues facing the state.

"He's got a great track record as treasurer," says First Ward alderman Manny Flores. "He's dealt with issues that others in the past haven't had the stomach to take on."

He's also encountered some bumps. This past January, Giannoulias announced that one of the funds in the Bright Start program had lost nearly 40 percent of its value. He accused the fund's manager, OppenheimerFunds, of making risky investments. It later became clear that Oppenheimer had lost money for similar programs in other states, and Giannoulias joined some of their top officials in pressing the company to replenish the accounts.

Critics say Giannoulias could have kept better tabs on the program. "When you're investing money for parents trying to pay for their children's college education, it should be very conservative," says his former opponent Radogno, who's now her party's leader in the state senate. "But the investments were far more risky than they should have been. There's a corollary here with what happened at his bank."

Over the past summer Giannoulias made a political fumble when the Tribune revealed that his office had used some Bright Start funds to pay for a hybrid SUV that he and other employees drove around the state. Initially Giannoulias dispatched a spokesman to say the car was needed to help promote the program. When that didn't end the flap, he came forward to say the same thing himself, adding that the SUV was a good long-term investment.

Giannoulias has an uneven record on one of the ethics reforms he promised. For two years he kept his campaign pledge not to take any political donations from banks. But he's skirted his own rules by accepting more than $90,000 from employees of banks and banking political action committees.

"As a person he seems very nice and likable," says Radogno. "But some of my concerns are still an issue as he tries to move up the political ladder—and they're about his experience and judgment. I don't think I've been made more comfortable by what I've seen him do with the treasurer's office."

Others say he's done a good job overall. "They run a very efficient office," says state rep Mark Beaubien, a Republican from Wauconda who sits on a committee Giannoulias formed to oversee the treasurer's work. "When he came in he kept the professional people who were in there before. He's extremely intelligent. I have a great deal of respect for Mr. Giannoulias. I just hope we can find someone to beat him."

Since the moment he was elected, Giannoulias has been described as "ambitious." His every move has been scrutinized by political observers certain his eyes were on a prize beyond the treasurer's office. And Giannoulias hasn't done much to discourage their speculation.

In August 2008 Giannoulias—along with state attorney general Lisa Madigan, comptroller Dan Hynes, Congressman Jesse Jackson Jr., and other top Illinois politicos—landed a speaking slot at the opening night of the Democratic National Convention, where Obama would be nominated for president. "Barack Obama has been my basketball buddy, my friend, my mentor, and my inspiration," Giannoulias said. "For me, public service would not have been possible without the example he set as a friend, as a man, as a leader this nation needs." Away from the cameras, he threw a convention party—generally an indication that the host has begun networking with potential supporters and donors in advance of a campaign for higher office.

Back in Chicago, Giannoulias hosted another big fund-raiser for Obama, and as the likelihood of an Obama presidency grew, Giannoulias's name was often floated as a possible replacement in the Senate.

On the morning of November 4, Election Day, Giannoulias, Obama, and several other friends played basketball to try to work off some of the tension. That night Obama was elected president—and the jockeying for his Senate seat soon reached a frenzy. On December 9, Governor Blagojevich was arrested and accused of trying to sell it to the highest bidder; Giannoulias was among the first wave of politicians calling on him to resign. Yet when reporters asked if he might run for the Senate himself in 2010, Giannoulias said he'd been too busy to think about it. "I've been focused on trying to do my job and trying to rebuild the public's trust in us as elected officials," he said.

He apparently found the time over the next couple weeks. By early February he was telling reporters that he was giving the Senate race serious consideration. When the man Blagojevich did tap, former state attorney general Roland Burris, stumbled in several attempts to explain what he'd discussed with Blagojevich aides before being appointed, Giannoulias joined the stampede urging him to quit. On March 2, Giannoulias announced that he was forming an exploratory committee. He raised more than a million dollars in the next month.

Giannoulias's announcement inspired little excitement in the White House. Not only was there no Obama endorsement, but word started to leak out of Washington that Obama advisers and top Senate Democrats were working to recruit someone else. Lisa Madigan met with Obama aides in the White House in June, according to her spokeswoman, and sources close to Cook County sheriff Tom Dart said he was contacted as well. In both cases, the Democratic Senatorial Campaign Committee promised that they wouldn't have to worry about raising money.

Given the credentials and popularity of Madigan—Mark Kirk said he wouldn't run if he had to oppose her—and Dart, who's highly popular in Cook County and has lots of political allies downstate, the race looked like close to a sure thing for either of them. Yet both declined to run, saying they'd rather try to keep their current jobs.

A couple other elite names also flirted with running—Bill Daley, the mayor's brother and Clinton's commerce secretary, and Christopher Kennedy, the son of Robert Kennedy and head of the Merchandise Mart—before opting out. Giannoulias is left with three rivals with far less name recognition or money than he has—Jackson, Hoffman, and Meister.

Supporters of Giannoulias say he didn't blink at the possibility of facing big-name opponents. "He stood steadfast and weathered the political storms," says county assessor Houlihan.

"I'm not sure what really happened there, but I think opponents of Alexi are trying to make it seem that the White House wanted other candidates," says Jerry Morrison, the state director of the Service Employees International Union, which has endorsed Giannoulias. "Look, I know people in the White House and I talk to them regularly, and I haven't heard anything to suggest they're unhappy with Alexi."

A couple weeks ago, Giannoulias told me that he'd met with Obama's advisers in the White House too. "They never promised they would back me or anything," he said. "I didn't expect anything. I think they just wanted Lisa because they knew she could win it—and why fight for it if you don't have to?"

Obama adviser David Axelrod said essentially the same thing a few days later in an interview with Chicago News Cooperative columnist and Reader publisher James Warren. "I thought Lisa would give us the best shot," Axelrod said.

Naturally, Giannoulias's opponents say he's simply a weak candidate. "In his seven years of experience at the bank and in the treasurer's office, he's acquired more baggage than most people do over their whole careers," says Michael Powell, who's Hoffman's campaign manager. The baggage, according to political insiders, including many who say they like Giannoulias, is the family business. This time the loans aren't the only issue—there's now the matter of the health of Broadway Bank.

At the end of 2006, the last year Giannoulias worked there, Broadway Bank reported net income of more than $45 million, and its return on assets was ranked fifth nationally among 240 banks of its size. But it ranked tenth in the share of its loans tied up in construction and development projects (44 percent) and second in the share of its loans that went toward real estate (97 percent), according to Russ Yates of SNL Financial, a firm that specializes in bank and real estate data analysis.

Then the real estate market began to sink, and fast, leaving many of Broadway's borrowers struggling to keep up with their loan payments. FDIC records show that from the end of 2006 to the end of 2007 the value of the bank's bad real estate loans—those at least 90 days past due—more than doubled, from $3.4 million to $7.4 million. And that was just the beginning of the trouble. By December 2008 the figure had soared to $39.3 million. Giannoulias had left the bank for the treasurer's office by this time, but since there's typically some lag time between when a loan is taken out and when it goes bad, it's probable that some of Broadway's problem loans were issued on his watch.

Meanwhile, Broadway continued its risky real estate lending practices. The bank went from $356 million in construction and development loans in 2006 to $443 million in September 2009; Yates says it now has a larger portion of its loan portfolio tied up in C & D projects than all but two of those 240 similarly sized banks. And the number of these loans going south has also increased. Less than 2 percent of the bank's loans were at least 90 days past due in 2006; now nearly a quarter of them are, which is the second-worst rate in the nation for a bank of its size. Broadway's gone from being among the country's most profitable institutions to operating in the red. Last year it reported a $14 million loss, and it lost another $27 million in the first nine months of this year.

Analysts say that when banks engage in high-risk lending they're supposed to sock away extra money to protect them against the likely losses. From 2002 through 2006, Broadway paid out between $11.3 and $15.4 million a year in cash dividends, according to FDIC reports. In 2007 and 2008, as its earnings went south, it paid out $47.8 million and $34.5 million. The Giannoulias family owns all the stock in the bank's holding company.

By this fall Broadway was at its lowest level of equity—the capital invested in the institution—in six years. "Once their loans started going bad, what did they do?" says Iannaccone. "They pulled money out, and that is the problem."

My calls to Broadway Bank's president, Alexi's brother Demetris, weren't returned. But Alexi says most of the bank's payouts in 2007 and 2008 were dictated by his father's will, which specified that estate taxes be covered with dividends. With a 3.6 percent stake in Broadway, Giannoulias says, he received about $2.5 million under this arrangement and paid about half of it in taxes.

At the end of September, 552 banks were on the FDIC's "problem list," up more than tenfold from 2006. There's no way to know if Broadway is one of them—the feds keep the names secret to prevent runs.

If the bank were to fail, the federal government would be on the hook to cover much of Broadway's $1.1 billion in deposits out of money that banks—through fees paid by their customers—contribute to an insurance fund.

And what would happen, some Democrats wonder, if that happened after Giannoulias won the Democratic nomination but before the general election?

"I think we're going to lose the seat," says Delmarie Cobb, a political consultant whose clients include Burris (who's not running to keep the seat). "He needed to spend [more] time in [state] office to let the controversies die down and build a record apart from them."

Nonsense, say Giannoulias's supporters. "Broadway Bank was a community bank and has not been viewed as part of the problem," says Jerry Morrison. "Lots of small businesses are in trouble. This isn't a Wells Fargo or Bank of America."

Morrison says voters will be more impressed with Giannoulias's progressive positions on issues that directly affect them. "I actually think it's a strong profile, to have somebody who comes out of a community banking background but stands up for working people."

Last Tuesday Giannoulias held a press conference to propose new regulations on banks and nonbank mortgage lenders. Among his ideas was a plan to require banks to keep more capital on hand to better insulate them from failure. "But only when the economy has stabilized," he said.

The reporters present didn't ask why Broadway Bank hadn't kept more capital on hand. They had other questions, like, did the White House try to recruit Lisa Madigan to run against him because they're worried about Broadway Bank's ties to the notorious Tony Rezko?

"I think you'd have to ask the White House," he said coolly.

What about Broadway Bank's risky loans for development projects in Florida?

"You have hundreds of community banks across the country dealing with some of the biggest challenges in their history, including Broadway Bank," he said. "I don't think even someone as smart as you could have seen the real estate market going the way it has. But you know, I haven't worked there for a while now." Despite his ownership share, he said, he has no voting rights or management input. He later added that he'd be willing to put money back into the bank to help save it if necessary.

The next day, the day before Thanksgiving, the Giannoulias campaign released his last four years of tax returns. In addition to the dividends he says were dictated by his father's will, he made nearly $5.5 million from 2005 through 2008, almost all of it as a stakeholder in Broadway Bank.

Find more coverage of the upcoming elections at chicagoreader.com/politics.