Reading behind the lines: Did the system fight Alexi in order to get to Obama?

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Alexi Giannoulias’ defeat in these elections was a great loss for the White House and President Barrack Obama himself as the Illinois Senate seat, held by Democrats up until now, was the one that launched him to the Oval office two years ago.

By Dimitri G. Soultogiannis

But has anyone ever questioned the negativity and at times the direct and harsh attacks of the local and national media as well as the greater political system against a young, upcoming politician with great ideas, work ethic, willing to work hard in order to bring change to his state, senate and country? Let’s take a closer look into what was said, written and published about fellow Greek American, Alexi Giannoulias. It seems like he had to work really hard to drug his name out of the mud and prove himself every day, during every step of the campaign process, in Illinois and around the country.

The latest attack ad in the Illinois Senate race beat a well-worn path. Republican Congressman Mark Kirk accused Democratic opponent Alexi Giannoulias of lending money to mobsters when he was a senior loan officer at his family's now-defunct bank and branded Giannoulias as a tax-and-spend liberal. It also accused Giannoulias of mismanaging oversight of a college savings program as state treasurer. Here's the text of the ad, which is titled "You must be kidding": What do you call someone who lent $20 million to convicted felons and mobsters? Senior Loan Officer… Alexi Giannoulias. What do you call a man who lost $73 million in our kids’ college savings? State Treasurer Alexi Giannoulias. What do you call someone who wants the government to spend more, and raise your taxes to pay for it? Senator Alexi Giannoulias? You must be kidding. Again, these accusations are nothing new.

In June, PolitiFact looked into a Kirk ad that claimed, "At his father's bank, Alexi made tens of millions in risky loans to convicted mobsters. Then, the bank collapsed." We rated that claim half true. The loans-to-mobsters claim is slightly different this time around, but we think you'll get the gist of things if you read that previous PolitiFact item. In this item, we'll explore the claim that as State Treasurer Giannoulias "lost $73 million in our kids’ college savings." When he was running to be Illinois State Treasurer, Giannoulias promised to revitalize the state's 529 colleges savings plan, called Bright Start. But a year after taking office in 2007, one of the funds in the program -- one that was supposed to be relatively conservative -- took a nosedive, losing more than 35 percent of its value. The bond market took a beating in 2008 with the collapse of the housing market. Lots of people lost a lot of money on investments. But the fund in question did much worse than its peers. That the fund lost big is undisputed, but what's murkier is whether it's fair to tag Giannoulias with responsibility for some, all, or any, of those losses.

First, a bit of background and context: The fund in question here is the Core Plus Fixed Income Strategy Fund, a fund managed by Oppenheimer Funds Inc. that was supposed to provide a conservative investment option for parents whose children were close to college age. The fund represented about 15 percent of the money invested in Bright Start. In April 2009, Morningstar, an investment research firm, called Oppenheimer Funds "the poster child for how badly some 529 players went awry in 2008." The Core Plus fund "lost more than 35 percent in 2008 due to management's bets on non-agency mortgages. In particular, management gained exposure to the battered commercial mortgage-backed securities market through derivatives that had a leveraging effect on the fund, amplifying losses," according to the Morningstar report. Non-agency mortgages are mortgages that are not backed by the government. Giannoulias has consistently blamed Oppenheimer managers for the losses -- as did Kirk back in October 2009. But an October 13, 2010, Chicago Tribune story by reporters Jeff Coen and Todd Lightly raises new questions about Giannoulias' culpability.

According to the story, "Documents and e-mails recently obtained by the Tribune under the state's open records law show the rookie treasurer and his staff were concerned early on about the aggressive move by Oppenheimer Funds Inc. in what was supposed to be a more conservative fund in the Bright Start program. "But at each turn Giannoulias stuck with the firm's strategy, even as the housing market soured and losses accelerated," the article said. In an interview with the Tribune, Giannoulias "reiterated that he was one of the first officials to confront Oppenheimer about the losses. He said he stayed the course based on advice from Oppenheimer managers, his own staff and an outside financial consultant." Financial analysts interviewed for the story noted that the "volatility of the market in 2008 caught many financial professionals off-guard" and that, among the many states with similar funds managed by Oppenheimer, "none reacted faster than Illinois." Together with the state attorney general, Giannoulias' office helped get a $77 million settlement from Oppenheimer -- recovering about half the estimated $150 million in losses suffered by the fund. And in December 2008, Giannoulias' office directed all new contributions to the fund to U.S. Treasury bonds. By then, the Tribune story notes, "Core Plus had lost 38 percent of its value for the year. Over the same period, other funds of its type showed about a 5 percent return."

In his interview with the Tribune, Giannoulias said, "It breaks my heart to hear that people have lost money in any fund. But what took place with the markets was devastating to a lot of individuals and a lot of businesses." Giannoulias' campaign further notes that in June, Kiplinger's named Bright Start among the top five college savings programs in the country, praising the index portfolios of mostly Vanguard funds for charging "rock bottom fees. Again, there's no dispute that the Core Plus fund lost $73 million, which likely caused a great hardship for many parents whose children were just about to enter college. And as State Treasurer, it was Giannoulias' job to oversee the Bright Start program. It's less clear, though, that it's accurate to claim Giannoulias lost that money. Yes, the Tribune story suggests Giannoulias had concerns early on about the aggressive investment strategy in the fund - but that he opted to stick with the firm's strategy on the advice of Oppenheimer managers and an outside consultant. But analysts also credited Illinois with reacting more quickly to the issues than other states, and Giannoulias helped get a settlement with Oppenheimer to recoup half the losses. There's a lot of context to consider here on both sides of the equation. Having done that, we rate the ad's claim half true.

And this was just one ad. There were more ads and stories that directly attacked Alexi Giannoulias. There were all aiming for Alexi’s loss in this election with the clear intension of hurting Barrack Obama while stealing the Illinois senate seat away from the Democrats. Any and all of you who were part of it enjoy your new Senator. As an American citizen, I hope and pray he does well for the state, the nation, our future…


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