State of Illinois
Alexi was announcing a $500 Bright Start scholarship to a lucky family in March. But will the money still be there when the kids need it?
State Treasurer Alexi Giannoulias - a candidate for the U.S. Senate seat currently held hostage by Roland Burris - will no longer talk about the Bright Start college savings program run out of his office. But that won't make the accumulating questions go away.
Chiefly, inquiring reporters want to know what did Giannoulias know, when did he know it, and what did he do about it. Illinois parents want to know, too.
The St. Louis Post-Dispatch put it this way:
"You have been saving dutifully for your teenager's education and, with college just a couple of years away, you have chosen what you think is a safe bond investment.
"Imagine your shock when, on opening your statement, you learn that your conservative, state-sponsored fund lost 38 percent of its value last year. If you're astute enough to dig deeper, you learn the fund was using derivatives to increase its exposure to mortgage-backed securities.
"Yes, even as the housing market was tanking, someone thought it was a good idea to make a risky, leveraged bet on mortgage bonds. And they did it with your kid's college fund.
"That happened to some investors in Illinois' Bright Start college savings program, causing the state to threaten legal action against Oppenheimer Funds, the program's manager."
Greg Hinz of Crain's has been aggressively following the story. "Illinois families lost $85 million in hard-earned savings on his watch," Hinz wrote on his blog on April 15. "Should he get the blame?"
Hinz points out that Giannoulias, heir to a banking fortune and a former banker in his own right, had been critical of the way his predecessor, Judy Baar Topinka, managed the program. Giannoulias shifted the program to Oppenheimer Funds - which turned out disastrously.
In his second post, on April 21, Hinz wrote: "Illinois Treasurer Alexi Giannoulias has been busily pointing fingers about why families that invested in his Bright Start college savings program lost $85 million last year, arguing that program manager Oppenheimer Funds deserves the blame. But the more I look, the weaker that explanation is."
And on Monday, Hinz followed up again in a post that accused Giannoulias of "exaggerating" the limits of his ability to comment publicly on a legal matter - "perhaps because the questions just keep on arising about whether he properly managed Oppenheimer, or just let it do what it wanted amid a rising number of red flags."
Illinois Republicans are already using the issue to batter Giannoulias, whose early million-dollar fundraising and close friendship with President Obama makes him a formidable Senate candidate.
The SEIU-funded Progress Illinois is coming to Giannoulias's defense, writing that "the claim that he absolutely should have known about the extreme risks taken by Oppenheimer is unsubstantiated at this point." (Prompting a reply by Hinz in the comment section.)
At this point, even if Giannoulias can make the case that he didn't mismanage Bright Start, it looks like Illinois voters will come to know their state's college savings fund, and its problems, better than they ever would have imagined.
Steve Rhodes is the proprietor of The Beachwood Reporter.