Penny Pritzker is the National Finance Chair of 2008 Democratic Party presidential candidate Barack Obama’s campaign. Yet the Obama campaign’s national finance chair served as chairman of the Superior Bank from 1989 to 1994, before the savings and loan institution collapsed in July 2001, due to the Pritzker bank’s involvement in financially reckless subprime mortgage lending.
Created at the end of 1988 as the successor bank to the failed Lyons Savings Bank, the Oakbrook Terrace/Hinsdale, Illinois-based Superior Bank was 50 percent owned by Chicago’s billionaire Pritzker family. Yet, according to an Oct. 16, 2001 statement before the U.S. Senate Committee on Banking, Housing and Urban Affairs by Ely & Company Inc. President Bert Ely, the Pritzker family’s Superior Bank “started life with enormous tax benefits and a substantial amount of FSLIC-guaranteed assets under a FSLIC Assistance agreement.” In a Dec. 2002 article (“Tremors In The Empire”) that appeared in Chicago Magazine, Shane Tritsch noted, for instance, that for investing $42.5 million in the failed Lyons Savings Bank before it was reopened as Superior Bank, the Pritzkers and their business partner received an estimated $645 million in federal tax credits and loan guarantees; but “by one estimate, it would have cost the government $200 million less simply to shut Lyons down.”
Yet according to Ely’s Oct. 16, 2001 statement, “Superior’s trick, or business plan” under Penny Prtizker’s chairmanship was apparently “to concentrate on subprimelending, principally on home mortgages, but for a while in subprime auto lending, too,” after the Pritzkers’ bank acquired its wholesale mortgage organization division, Alliance Funding, in December 1992.
With a business loss estimate of between $350 million and $1 billion, the 2001 failure of the Pritzkers’ Superior Bank represented the largest U.S.-insured deposition institution to fall between 1992 and 2001. But according to a Feb. 7, 2002 report of FDIC Inspector General Gaston Gianni Jr., “the failure of Superior Bank was directly attributable to the Bank’s Board of Directors and executives ignoring sound risk management principles.”
Coincidentally, the Obama presidential campaign’s National Finance Chair was a member of the Superior Bank’s board of directors which apparently ignored sound risk management principles. As the Aug. 7, 2001 issue of the New York Times observed:
“The Pritzkers controlled half the board seats. Penny Pritzker…was on the board, and Glen Miller, a top financial officer in the Pritzker organization, was chairman of the audit committee…Penny Pritzker…was designated…to watch over the Superior investment.”
Business Week magazine also noted in a Sept. 10, 2001 article (‘The Pritzkers’ Empire Trembles”) that “as of July [2001],” Penny Pritzker “was still a director of the thrift’s holding company, Coast-to-Coast Financial Corp….”
The Superior Bank board of directors on which the Obama presidential campaign National Finance Chair sat “paid dividends and other financial benefits without regard to the deteriorating financial and operating condition of Superior,” according to FDIC Inspector General Gianni’s Feb. 7, 2002 report. As Ely & Company Inc. President’s Ely’s Oct. 16, 2001 statement observed:
“Superior paid $188 million in dividends in the 1989-1999 period, which gave Superior’s stockholders an 18.1 percent pretax cash return on their initial investment of $42.5 million in Superior.”
Before Superior Bank’s 2001 collapse, stockholders like the Pritzker family members also “may have reaped additional profits from the substantial tax benefits the Federal Government gifted to them” when they acquired the failed Lyons Savings Bank in 1988 and created the successor Superior Bank, according to Ely’s Oct. 16, 2001 statement. Between 1992 and 1998, for instance, Superior Bank claimed a Federal tax credit of $10.6 million and only began to pay a meaningful amount of Federal income tax in 1999.
To avoid being punished for the failure of Superior Bank, the Pritzker family agreed to pay the FDIC $460 million. Yet even with this settlement, the failure of the Superior Bank due its board’s apparent mismanagement will cost the federal thrift insurance agency (and U.S. taxpayers) about $440 million.
The 1,400 Superior Bank depositors whose savings deposits in excess of $100,000 were uninsured, however, brought a federal civil racketeering suit against Penny Pritzker and other former Superior Bank officials. Not surprisingly, Business Week magazine reported in September 2001 that “the collapsing Superior Bank, a $2.3 billion thrift that” Penny “Pritzker chaired from 1989 to 1994” was “ putting the family business savvy under the klieg lights in Washington and beyond.”
Less than two years after the U.S. Senate’s Committee on Banking, Housing and Urban Affairs held a hearing on “The Failure of Superior Bank,” former Superior Bank Chairman of the Board Pritzker, coincidentally, began to financially back Obama’s 2004 campaign to become a U.S. Senator from Illinois. As David Mendell recalled in his 2007 book Obama: From Promise To Power:
“Obama was confident that he was destined for more than a day job running a foundation or practicing law or languishing in the minority party in the Illinois senate…He invited a group of African-American professionals to the house of Marty Nesbitt, who had served as finance chairman of his congressional campaign. Nesbitt is…vice-president of the Pritzker Realty Group, part of the Pritzker family empire…Nesbitt arranged a weekend gathering to help Obama reach inside the deepest pockets he knew—those of the Pritzker family…
“…Nesbitt knew that if Obama could sell himself to Penny Pritzker, her support would not only reap huge immediate financial dividends but also be a crucial step in the foundation of a fund-raising network.
“So in late summer 2002, Obama, Michelle [Robinson-Obama] and their two daughters drove to Penny Pritzker’s weekend cottage along the lakefront in Michigan about forty-five minutes from Chicago…”
Given the past involvement on the board of a failed savings bank that engaged in financially reckless subprime lending of the 2008 Obama presidential campaign’s National Finance Chair, it’s not surprising that an article in The Nation (2/11/08) by Max Fraser, titled “Subprime Obama,” reported that “only Obama has not called for a moratorium and interest-rate freeze;” and that Josh Bivens of the Economic Policy Institute said that “There’s been less emphasis from the Obama campaign on the really dysfunctional role of the financial industy in the subprime mess.”
Incidentally, former Superior Bank Chairman Penny Pritzker contributed $100,000 to the Democratic National Committee [DNC] in 2000.
Next: Revisiting In These Times' “Breaking The Bank” Article
James and the Twenty-Seven Bicycles
14 years ago
9 comments:
Change you CAN believe in, but.....SHOULD you believe in it?
That answer, HECH NO!
They are all, brown, black or white only Hitler Dees and Hitler Dums.
Hey, Bob, speakin' of alternative history, here's moi's lill' YouTube film/research.
http://www.youtube.com/watch?v=Z7iQRFP_e90
Stay on groovin' safari,
Tor
These anti-capitalists rants and posts make me nostalgic for my college years. But in the present day they seem wildly unfair and certainly do a disservice to the fine corporate and charitable work of Penny Pritzker and her family. Is this what happens when a successful woman enters public service? Apparently it's all about scorched earth campaigning -- trying to drive good people out of the process -- and not the truth. No wonder so many Americans are turned off by politics.
The fact is, Penny Pritzker left her position as chairman of the board of Superior Bank 14 YEARS AGO, and years before there were any questions about the work of its managers and auditors. The Pritzker family lost millions by investing in the bank. The roughly 1,400 bank customers who had more than $100,000 in deposits are substantially whole.
The activities of Superior Bank in the mid-90's have no bearing whatsoever on current mortgage and lending conditions affecting the US economy. This is old news being manipulated by people who have agendas. The Pritzker family has done more to help Chicago than any family I know. They shouldn't be driven out of politics by the shock and awe tactics of mean-spirited and mostly anonymous bloggers.
As a former investigative reporter in Chicago, I’d say these old stories were thinly reported and agenda-driven back in 2001 … and carry even less weight in 2008.
Thanks for your interest in the involvement of the Obama campaign's national finance chair in the 2001 Superior Bank S&L scandal.
Actually, the fact is that Penny Pritzker remained on the board of Superior Bank and its Coast-to-Coast Financial Corp. holding company until the Superior Bank collapsed in 2001. Then, in recent years, the Obama campaign's national finance chair apparently has sat on the board of LaSalle National Bank.
And, actually, the fact is that, in the words of the Office of Inspector General's Feb. 6, 2002 report:
"Many of the aforementioned red flags and indicators of developing problems [with the Superior Bank board's subprime mortgage lending and predatory lending operations] were raised by OTS [Office of Thrift Supervision] as early as 1993. However, the supervisory record reflects a pattern whereby thrift management promises to address supervisory concerns were not fully responsive or were not implemented...The pattern of non-responsiveness by Superior's management continued into the later years."
In his Feb. 6, 2002 letter to the U.S. Senate Committee on Banking, Housing and Urban Affairs, the Inspector General also stated:
"The failure of Superior Bank was directly attributable to bank management and the board of directors ignoring sound risk management principles and failing to adquately oversee Superior operations."
In addition, the Pritzkers not only unethically collected escessive dividends and unnecessary tax benefits by owning 50 percent of Superior Bank between 1988 and 2001. But after they allowed the bank to collapse by refusing to shift more of their money into the bank, the Pritzkers also gained millions from the FDIC's money settlement with the accounting firm that Superior Bank had used. (See 2004 article of Associated Press).
In his Feb. 6, 2002 report, the Inspector General also concluded that "based on our review of the failure of Superior Bank it appears that some of the decisions made by Superior management rise to the level of insider abuse." The office of Thrift Supervision Director, Ellen Seidman, also stated on October 16, 2001:
"The problem still could have been solved. The people who own this institution [Superior Bank] not only have the resources to solve the problem, but also had promised to solve it, and then walked waya a mere week before the deadline, making it impossible to find an alternative solution."
U.S. Senator Tim Johnson also observed on September 11, 2001 that "according to one report, 816 depositors held $66.4 million in uninsured deposits on the day Superior was shut down" and "even worse, to my mind, is the fact that Superior's uninsured deposits increased by $9.6 million in the second quarter of this year [2001] when the regulators knew that the bank was in trouble...We have reports that Superior misreported its Thrift Financial Reports..."
If the Pritzkers had not apparently been able to use their special political influence to discourage federal bank regulators from cracking down in the early 1990s on the banking industry's subprime mortgage lending and predatory lending practices, the current U.S. economic crisis that resulted from this kind of subprime mortgage lending and predatory lending might not have developed in the 21st-century.
It is kind of telling, though, when the Nation article you copied this from mentions the civil suit, but doesn't mention that the suit was brought against Jay, not the Pritzker's en masse.
Lacking any word on where the trial is shows a certain lack of allegiance to the truth, too.
Not that I think any of 'em are that good, but the Constitutional Law Professor bit, and being the editor of the Harvard Law Review, well, that is impressive.
Did you know UC is the top "right wing evil genius" law school, according to a friend of mine?
If you are just interested in left/right, Obama is 10 Senators to the left of Clinton.
I am so sorry! You were published in The Nation online. Congratulations.
Please accept my apologies for my confusion, and the misuse of the apostrophe.
The rest stands.
Thanks for considering the issues I raise in this article.
If you check either the Nov. 8, 2002 issue of In These Times "Breaking The Bank" article or the post on my blog on the day after the posting you commented on, you'll notice that the civil racketeering suit I mention was, indeed brought against Obama campaign national finance chair Penny Pritzker (in Illinois federal court). Following is the relevant passage:
"Meanwhile, in a case that has received no public notice, uninsured depositors are bringing a charge of financial racketeering against one-time board chairwoman Penny Pritzker, her cousin Thomas Pritzker, Dworman, other bank principals and Ernst & Young. In this federal class-action suit filed under the RICO (Racketeering Influenced and Corrupt Organizations) statute, plaintiffs’ attorney Clint Krislov claims that those who controlled Superior induced depositors to put money in the bank, “corruptly” funneling money out of the bank to “fraudulently” profit the owners."
When Penny Pritzker sat on the board of Coast-to-Coast-Financial and its Superior Bank subsidiary, its Alliance Funding division engaged in subprime mortgage lending and predatory lending. The Alliance Funding division then provided a supply of subprime residential mortgages "for Superior to fund, package, and sell to parties who would complete the securitization process" (such as Bear Stearns, according to the Office of Inspector General's Feb. 2002 report. When the recipients of the Alliance Funding/Superior Bank subprime mortgages would, predictably, be unable to meet their mortgage payments in the late 1990s and early 21st-century, Bear Stearns/EMC division would then foreclose on their mortgages, acquire their homes at little cost and (during the housing bubble) resell the houses at a big profit. But once the housing bubble burst, firms like Bear Stearns which held the "securitized" products that included the subprime mortgages that Superior Bank managers had reckless made, apparently found that they were suddenly holding a lot of worthless paper.
Neither Obama nor Clinton is anti-corporate in their politics. And Obama is still not willing to hold Penny Pritzker accountable for her involvement in helping to create the current subprime mortgage and predatory lending-stimulated economic crisis situation. In addition, Obama apparently supports using federal government and political influence to bail out the Wall Street investment bankers who are responsible for the current U.S. economic mess. One reason might be that, according to the Center for Responsive Politics site, the Obama campaign's top donor is "Goldman Sachs" (i.e. Goldman Sachs corporation executives), who have given his campaign over $470,000 in campaign contributions.
What should also be mentioned is that U.S. Senate Foreign Relations Committee Member Obama has apparently not used his position as a member of the U.S. Senate Foreign Relations effectively to call for the immediate withdrawal of U.S. military forces from the Middle East and an end to U.S. military aid to all governments in the Middle East. So it may not actually be true that there's much of a qualitative difference between Obama and the Clintons, even on the issue of who is more likely to immediately end the U.S. military occupation of Iraq and U.S. government support for the violation of Palestinian national self-determination rights,etc.
And thank you for your response to my comment. One rarely finds critique well-handled on the 'net.
I'm still unaware about the course of the RICO case. Certainly, if it was thrown out in summary judgement there would be a different overall implication than if we were in the Xth year of a sealed court proceeding. It's not your responsibility to tell me, of course.
And I know neither Obama, nor Clinton (nor Edwards, who I was tepidly supporting before he dropped out) will do much to help in the Middle East. At least, with Obama, he once said that the Palestinians "the most oppressed people on Earth." Even if he has officially changed, in order to get elected, I think that is better than the other two by a long shot.
Nice article...thx
Hello !.
You re, I guess , probably very interested to know how one can make real money .
There is no need to invest much at first. You may commense to receive yields with as small sum of money as 20-100 dollars.
AimTrust is what you need
The company represents an offshore structure with advanced asset management technologies in production and delivery of pipes for oil and gas.
Its head office is in Panama with offices around the world.
Do you want to become a happy investor?
That`s your chance That`s what you wish in the long run!
I feel good, I began to take up real money with the help of this company,
and I invite you to do the same. If it gets down to select a proper partner utilizes your funds in a right way - that`s the AimTrust!.
I make 2G daily, and my first deposit was 1 grand only!
It`s easy to get involved , just click this link http://rypubehap.arcadepages.com/tahofug.html
and lucky you`re! Let`s take our chance together to become rich
Post a Comment