As the August 6th bailout deadline
approaches, when the federal government must either give ShoreBank $75 million or take it over entirely, new evidence is emerging about ShoreBank’s connections to Chicago politicians.
The latest revelations raise new questions about the possible role of Illinois State Treasurer Alexi Giannoulias, who is also the Democratic nominee for U.S. Senate in the upcoming November election.
[caption id="attachment_150646" align="aligncenter" width="340" caption="Alexi Giannoulias (D) - Source: Crain's Chicago Business"]
Shortly after Giannoulias took office in 2007, the Illinois Student Assistance Commission (ISAC), a state-run college fund, invested
$12.7 million in ShoreBank. Some of ISAC’s funds came from parents who invested in Bright Start, a program to help them save for their children’s college tuition.
As of this week, according to Crain’s Chicago Business, ISAC’s ShoreBank stake has lost over 80% of its value--which not even a bailout will restore.
The $12.7 million investment was ISAC’s “first and only direct investment in a privately held company,” according to Daniels. Furthermore, ISAC’s investment made the tuition program the single largest shareholder in ShoreBank.
That same year, 2007, marked the beginning of ShoreBank’s financial decline, which we now know
resulted from investments far outside the bank’s “traditional” market in poor communities on Chicago’s South Side.
As state treasurer, Giannoulias was responsible for ISAC, even though the decision to invest in ShoreBank was taken by ISAC’s executive director. His role in Bright Start, in particular, has been questioned before. On Giannoulias’s watch, Bright Start lost
$150 million in a fund that invested in sub-prime mortgages. Giannoulias also bought
an SUV for his office using $26,000 of Bright Start’s management fees.
Giannoulias has spun his record as a success. But there is no way to spin ISAC’s ShoreBank investment. No reasonable investor--not even one working for the government--would choose to buy the largest stake in a business specializing in risky loans as their first investment in a privately held company.
The only reasonable conclusion is that ISAC invested in ShoreBank for political, not financial, reasons.
The timing is especially suspicious. ISAC only invested in ShoreBank in 2007, after Giannoulias arrived in Springfield, and at a time when Giannoulias was actively involved
in management changes at Bright Start.
Giannoulias should be asked about why ISAC chose to invest in ShoreBank, and about his role in the decision. He should also be asked whether the state participated in ShoreBank's management decisions through ISAC.
There is much more to the ShoreBank story. Its patrons are running out of excuses, and running out of time.