Obama's Pritzker Problem

Incorporated into today’s post—Obama’s Finance Chair Failed Bank Owner Penny Pritzker—Uppity Woman reposted her April 3, 2008, article on Penny Pritzker and the failed Superior Bank. Be sure to read it.

However, not to be outdone, RBO is posting below our April 3, 2008, piece, “Obama’s subprime problem”.

Also see Dan Riehl’s July 22, 2008, post Penny Pritzker: It Gets Worse? h/t Bessie

On a list of ten questions he’d like Sen. Barack Obama (D-Ill.) to answer, author and political analyst Earl Ofari Hutchinson recently listed the following as number 6:

The head of your campaign finance chair is Penny Pritzker. Before taking over Obama´s campaign finances, she headed up the borderline shady and failed Superior Bank. It collapsed in 2002. The bank engaged in deceptive and faulty lending, questionable accounting practices, and charged hidden fees. It made thousands of dubious loans to mostly poor, strapped homeowners. A disproportionate number of them were minority. Why does she still have a principal financial role in your campaign?

… when is someone going to talk about Obama financial campaign chairman - Penny Pritzker, that cost the Federal Government - taxpayers one billion dollars when Superior Bank failed, and 450 million dollars still owed to the FDIC - and they gave her 15 years to pay back - no interest, if Obama get elected is he going to waive this money owed, all the people the work so hard for there money Obama talks about, hundreds of them, lost there money at Superior Bank, Ms. Pritzker is the only one that made out on that deal.

For those who do not know, “billionaire business mogul” Penny Pritzker was named in January 2007 as Sen. Barack Obama (D-Ill.)’s national finance chairman. She was also on the finance committee for Obama’s 2004 campaign for the U.S. Senate. In August 2001, Penny, Thomas, and Nicholas Pritzker were described as “struggling with a complicated legacy”—”a vast real estate and Hyatt hotel empire”—left to them by its founder, Jay Pritzker, the New York Times reported. In 2005, Forbes counted Penny Pritzer among The 100 Most Powerful Women, as well as a member of the Forbes 400.

Superior Bank, half-owned by the wealthy Pritzker family, was shut down by the FDIC Friday after a bailout plan by the Pritzkers, who own the Hyatt Hotel chain, and their partner, New York real estate developer Alvin Dworman, fell through. The bank failed because it had lost nearly all of its more than $2 billion of assets on bad loans to high-risk borrowers, federal regulators said.

The FDIC reopened the bank Monday as Superior Federal and is seeking a buyer and a new CEO.

Superior’s failure could cost the FDIC $500 million or more–some observers now are pegging the loss at closer to $1 billion, one of the largest bank failures ever.

On September 11, 2001, Ellen Seidman, Director of the Office of Thrift Supervision, told the Senate Banking Committee:

Superior, which had assets of $1.8 billion as of June 30, 2001, became critically undercapitalized largely due to incorrect accounting treatment and aggressive assumptions for valuing complicated financial instruments known as residuals. “The risk from a concentration in residuals at Superior was exacerbated by a faulty accounting opinion by the institution’s external auditors that caused capital to be significantly overstated, and by management and board recalcitrance in acting on regulatory recommendations, directives and orders.”

The New York Times reported December 11, 2001, that the Pritzkers had agreed to pay a “record $460 million” spread out over 15 years to the federal government to avoid being punished” for Superior Bank’s failure. It was “the largest settlement ever in the failure of a banking institution. The failure itself is one of the largest in the last decade, one that some estimate could cost the government up to $1 billion.”

“Regulators said Superior had collapsed because of poor lending practices and sloppy bookkeeping,” Time wrote. “The bank specialized in loans to people with poor credit histories, a practice called subprime lending.”

Time also reported that the Pritzkers, who “have a long and troubled history in the S.& L. business” and “once battled the Internal Revenue Service over estate taxes, … also agreed to cede 90 percent of any money they might recover in separate litigation with the government.”

Barack Obama’s proposal is tepid by comparison, short on aggressive government involvement and infused with conservative rhetoric about fiscal responsibility. As he has done on domestic issues like healthcare, job creation and energy policy, Obama is staking out a position to the right of not only populist Edwards but Clinton as well.

Edwards’s plan includes a mandatory moratorium on foreclosures, a freeze on rising interest rates for at least seven years, federal subsidies to help homeowners keep up with payments and restructure loans, and explicit measures to rein in predatory lenders and regulate the financial sector. Clinton’s plan is weaker–a voluntary moratorium, a shorter freeze, less commitment to new regulations–but she has promised $30 billion in federal aid to help reeling homeowners and communities.

Only Obama has not called for a moratorium and interest-rate freeze. Though he has been a proponent of mortgage fraud legislation in the Senate, he has remained silent on further financial regulations. And much like his broader economic stimulus package, Obama’s foreclosure plan mostly avoids direct government spending in favor of a tax credit for homeowners, which amounts to about $500 on average, beyond which only certain borrowers would be eligible for help from an additional fund.

When asked if Obama would hold these financial institutions accountable for losses incurred by homeowners and investors, his campaign refused to comment.

Pritzker’s ripped off Orlando and Florida tax payers for 10’s of millions, and then the Pritzjers ripped off the residential and commercial buyers, and ripped of the mortgage company too.

http://www.chicagomag.com/Chicago-Magazine/December-2002/Tremors-in-the-Empire/

Tremors in the Empire
The Pritzker family’s $15-billion fortune represents a great American success story—a rags-to-riches tale of hugely profitable deals and dedicated philanthropy. Now, beset by the collapse of a financial institution it owned, and pulled apart by diverse interests, a new generation struggles to keep the dynasty on course.
By Shane Tritsch

(page 1 of 10)

This article appears in the December 2002 issue of Chicago Magazine.

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