Barack Obama’s campaign finance chief Penny Pritzker has been tapped as Commerce Secretary. This Chicago Sun-Times article from April gives some background:
White House hopeful Barack Obama talks a lot on the campaign trail about how failing banks have used subprime loans to victimize customers. “Part of the reason we got a current mortgage crisis has to do with the fact that people got suckered into loans that they could not pay,” he told a crowd in Reading, Pa., last week. “There were a lot of predatory loans that were given out, a lot of teaser rates. Banks and financial institutions making these loans were making money hand over fist.”One of the banks that went under after making a lot of subprime loans — leaving 1,400 of its customers without part of their savings — was Chicago’s Superior Bank. At the helm of Superior Bank at least some of the time was Obama’s national finance chairwoman, Penny Pritzker, an heiress to the Pritzker fortune.
In October, the Washington Times reported:
The Obama campaign does not dispute that Ms. Pritzker advocated subprime lending as the bank was failing but said she was “never accused of any wrongdoing nor did she receive compensation in relation to the closing of Superior Bank.” The campaign said that instead of “walking away as millions of homeowners and stockholders suffered, the Pritzker family entered into a voluntary settlement and agreed to pay the government” $460 million that the bank cost taxpayers over 15 years to defray its losses.
That’s little solace to the victims of Superior Bank’s failure, who are still attempting to recoup their losses via a lawsuit and feel left behind in the current financial crisis, which was spurred, in part, by the very same subprime lending that sank their deposits.
Pritzker has described the bank’s failure as a “complex” matter, but as the Washington Times reported, the FDIC was quite harsh in its evaluation:
A Feb. 7, 2002, FDIC report said the bank’s failure “was directly attributable to the bank’s board of directors and executives ignoring sound risk management principles.” The report said the bank “paid dividends and other financial benefits without regard to the deteriorating financial and operating condition of Superior.”
“Superior Bank suffered as a result of its former high-risk business strategy, which was focused on the generation of significant volumes of subprime mortgage and automobile loans for securitization and sale in the secondary market,” the OTS said. “The bank also suffered from poor lending practices, improper record keeping and accounting, and ineffective board and management supervision.”
Will any of this prevent her confirmation? Unlikely, given the large Democratic majority in the Senate. But, as with the Eric Holder selection, one would think there must have been equally qualified people without such baggage. One thing is for certain: no Republican would have had the nerve to nominate someone with this background.