Lawmakers on Capitol Hill have renewed their efforts to prevent a bank that received Troubled Assets Relief Program funds from upending attempts to revive bankrupt Hartmarx Corp., the last major high-end men’s clothing maker in the U.S. and President Obama’s tailor of choice.

This story first appeared in the May 1, 2009 issue of WWD. Subscribe Today.

Rep. Phil Hare (D., Ill.), who represents an Illinois district in which a Hart Schaffner Marx factory operates, told WWD Thursday he is working with House Financial Services Committee Chairman Barney Frank (D., Mass.) to pressure Wells Fargo into maintaining the company’s financing, preventing a liquidation and allowing bidders a chance to purchase the Chicago-based firm.

He made his comments as sources within the company told WWD it was at a critical juncture in its ability to fund operations, with finances beyond the delivery of Thursday’s payroll in question and liquidation a growing possibility.

Hare, who for 13 years beginning in 1969 worked as a cutter in a Hart Schaffner Marx factory in the district he now represents, said he and Frank, along with union and Hartmarx officials, reached an agreement in principle with Wells Fargo in January in which the bank agreed to not “force Hartmarx into liquidation because there were potential buyers.”

However, Hare said he learned two weeks ago that Wells Fargo Capital Finance “evidently had a change of heart” and now appears to be leaning toward total liquidation of Hartmarx.

Bruce Raynor, general president of UNITE HERE, who has worked to find potential buyers to keep the unionized Hartmarx afloat, was also in Washington on Thursday meeting with lawmakers and administration officials, soliciting their help.

Raynor said Wells Fargo has been tightening the screws on Hartmarx’s $120 million debtor-in-possession credit line, of which Wells alone controls $100 million.

“As I understand it, these bankers are squeezing the company in an irresponsible fashion,” said Raynor. “They keep tightening the rope and what that does is choke the company gradually.”

Executives at Hartmarx declined comment, as did Vicky Geist, the Wells Fargo liaison to the Hartmarx bankruptcy.

Raynor said he has been soliciting help in Washington to pressure the banks to adequately fund Hartmarx “so the company can operate successfully until a deal is made. If they get billions of dollars of federal government money, they need to act responsibly to save several thousand jobs in states like Illinois, New York, Alabama and Pennsylvania, and in Ontario, Canada.”

Adding insult to injury, from the lawmakers’ perspective, Wells Fargo was the recipient of $25 billion in the government’s TARP funds, according to Hare.

Sources close to Hartmarx said the bank has been threatening to pull financing as a means of exerting pressure to control the course of the bankruptcy, particularly over negotiating points in a bidding process that involves three parties: Mistral Acquisition Corp., Emerisque and The Yucaipa Cos. The pressure has intensified in recent weeks, they said, as has the acrimony among lenders and secured and unsecured creditors.

“I think Wells Fargo has a moral obligation to keep the word it gave us in December and early January,” said Hare. “For heaven’s sake, let the companies [potential bidders] buy them [Hartmarx]. I will not continue to send money to banks that run people out of their homes and businesses. I’m livid with Wells Fargo. I don’t know what their logic is.”

Hare said he placed a call to Wells Fargo that has not been returned and he planned to meet later Thursday with Frank, who, he said, was also planning to call the financial institution.

“We have very little apparel that is made in this country and now we have an American bank taking American taxpayers’ money and, in essence, forcing an American company with 3,500 jobs out of business,” said Hare. “Once they [Hartmarx] are gone, they are gone. I find that to be un-American.”

Hartmarx, which filed for Chapter 11 bankruptcy protection in late January, is believed to have drawn down at least $100 million of its $120 million DIP facility by early April. Wells Fargo, its receipt of TARP funding notwithstanding, is under pressure to ensure it gets repaid on its loan, and it has to assess risks connected to Hartmarx and its own loan portfolio in determining whether to extend the facility.

Hartmarx appeared to have adequate funding at the beginning of the week. However, word surfaced late Wednesday the company might not be able to get letters of credit through Wells Fargo. While one sticking point obstructing financing was apparently resolved at the 11th hour, another, echoing difficulties that preceded the company’s bankruptcy, persisted, pertaining to the firm’s ability to move on fall and holiday orders in overseas factories.

As overseas suppliers tired of waiting for LCs to clear, some were asking to have payments wired so they would have cash on hand before starting production. Even if the DIP were to remain in place, the company would be unable to operate if new orders couldn’t be made and shipped.