CHICAGO - Democrats here are quietly worrying about whether Illinois Treasurer Alexi Giannoulias can win President Obama's old Senate seat. His family's bank is thought to be on the verge of collapse and reportedly made $20 million in loans to two convicted felons.
Republican nominee Rep. Mark Steven Kirk is already accusing Mr. Giannoulias of lying to the voters about the loans, and his campaign is guaranteed to be pounding away at the bank's problems in millions of dollars worth of television ads.
But the 34-year-old Mr. Giannoulias is still electable if he meets the bank embarrassment head on and strikes back at the Republican congressman as more conservative than this Democratic-trending state, Democratic insiders say.
Democrats brush aside any talk of getting Mr. Giannoulias to bow out of the race. Incumbent Democratic Sen. Roland W. Burris, appointed to serve out Mr. Obama's term under shady circumstances, is not running for re-election and the capture of the president's old seat would be a major coup for Republicans.
The few public polls in the race, dating back to last month, gave the Democrat a slight edge over Mr. Kirk, but both parties are predicting a close - and expensive - battle.
"Alexi Giannoulias is running a strong campaign on the issues that matter to the people of Illinois - like job creation and the economy," says Deirdre Murphy, national press secretary of the Democratic Senatorial Campaign Committee.
Mr. Giannoulias was not granting interviews in the aftermath of a Chicago Tribune front-page story late last week with the headline: "$20 Million in Bank Loans to Felons." The story detailed how Broadway Bank, a Giannoulias family-owned institution in Chicago, had lent large sums to convicted felons Michael "Jaws" Giorango and Demitri Stavropoulos.
The fact that Broadway had loaned the men millions - Stavropoulos was convicted of running a multistate bookmaking ring and Giorango of promoting a nationwide prostitution ring - was already a campaign issue when Mr. Giannoulias ran for state treasurer in 2006. But the Tribune reported it reviewed court files and other documents that showed millions more - a total of more than $27 million worth of mortgages to Giorango, his land trusts and companies since 1999, $20 million of which was loaned when Mr. Giannoulias was a senior loan officer.
Giannoulias spokeswoman Kathleen Strand said the candidate had "no role with these two individuals, nor did he sit on the loan committee with these loans." She sought to portray the story as old news, saying Mr. Giannoulias has been answering questions about the loans for years.
The bank is fighting to keep its doors open. It is holding about $242 million in bad loans, and in January, entered into a consent decree with the federal government and has 90 days to raise about $85 million. But Mr. Giannoulias recently said in an interview that he thinks it would be "very tough" for it to survive.
Democratic insiders in Washington, who spoke on the condition of anonymity so they could freely discuss their views, say they expect the bank to fail eventually, but think that will be greeted as "old news" by voters.
The White House's political team, still smarting after the stunning loss of the late Sen. Edward M. Kennedy's Massachusetts seat to Republican Scott Brown, has refocused its attention beyond the Beltway. Though not responsible for all Democratic campaigns, White House officials are aware any Democratic loss will be painted as a referendum on Mr. Obama.
The Democratic insiders said they learned lessons from Mr. Brown's election and have made sure Mr. Giannoulias' team would be unlikely to require a wave of Washington consultants to buttress a flailing campaign, as happened in Massachusetts.
While the White House isn't keen on saying that Mr. Giannoulias stands to recoup only a few million dollars from the wreckage of the bank, internal polls and focus groups show he can win with that approach, according to these insiders.
They say Mr. Obama, who remains popular in his home state, will campaign for Mr. Giannoulias, and top political adviser David Axelrod, a veteran of Chicago politics, is in constant touch with developments in Illinois.
At the Statehouse in Springfield, the hallway whispers are that top Democratic leaders would have preferred Illinois Attorney General Lisa Madigan, whose father, House Speaker Michael Madigan, is party chairman. But she didn't run, and some say she probably would prefer to run for governor if she had her choice.
Meanwhile, Mr. Kirk capitalized on the fresh attention to his opponent's woes, saying in a statement Friday that Mr. Giannoulias has falsely claimed that he didn't know about the criminal backgrounds of Giorango and Stavropoulos.
"Alexi Giannoulias misled voters to get elected state treasurer and continued to mislead voters in an effort to win election as a United States senator," he said.
Chicago political consultant Don Rose said that if the election were held now Mr. Kirk would win, but that there is still a good opportunity for Mr. Giannoulias to make up lost ground, especially if the economy improves.
"They have to make Kirk unpalatable politically and level the playing field," Mr. Rose said. "Of course, the best thing would be if they could get [Giannoulias] to resign and replace him" - a scenario Democrats say is not going to happen.
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