Obama's Subprime Problem
John Courtney, commenting February 9, 2008, at Bob McCarty's BMW blog asked
... 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.
About the Superior Bank failure
The Chicago Sun-Times reported August 3, 2001:
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."
The Obama Subprime plan
Max Fraser wrote January 28, 2008, in The Nation
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.
--snip--
When asked if Obama would hold these financial institutions accountable for losses incurred by homeowners and investors, his campaign refused to comment.
Pritzker's campaign contributions
Penny Pritzker is a generous patron to both Republican and Democratic political candidates, including Barack Obama. In 1999, she contributed $1,000 to his
unsuccessful run for the U.S. House of Representatives. She contributed to the Obama for Illinois campaigns: $1,000 in 2002 and $2,000 and $9,000 in 2003. In
February 2005, Pritzker was an early contributor to Obama's Hopefund, donating $5,000. On January 16, 2007, nearly a month before he officially announced his run
for president, Pritzker had already donated $2,100 to his primary fund.
In November 2007, Pritzker was listed among Obama's super bundlers, having raised more than $200,000 for his campaign.
UPDATE: Taking a closer look at Federal Election Commission records for Obama for Illinois—2002, 2003 and 2004—reveals that the Pritzker family have contributed
heavily to Obama's campaigns: Jay Robert Pritzker, 9/9/04 - $2,000; Thomas Pritzker, 2/27/03 - $2,000 and 2/3/04 - $250; John A. Pritzker, 9/22/04 - $1,000 and
9/24/04 - $1,000; Lisa S. Pritzker, 9/22/04 - $1,000 and 9/24/04 - $1,000; Margot L. Pritzker, 4/30/04 - $1,000 and $1,000; Marian Pritzker, 5/5/03 - $500; Mary
Kathryn Pritzker, 9/9/04 - $2,000; Nicholas Pritzker, 3/26/03 - $5,000; 9/4/03 - $7,000; and 5/7/04 - $2,000; Penny Pritzker, 10/15/02 - $1,000; 2/27/03 - $2,000; and
6/27/03 - $9,000; Rhoda Pritzker, 10/13/03 - $250; and Susan Pritzker, 2/27/03 - $1,000 and 3/24/04 - $1,000.
Going back even further to Illinois State Board of Elections for Obama's state campaign finance records for Friends of Barack Obama shows that Penny Pritzker first
contributed $1,000 to Obama in April 2001, just prior to Superior Bank's money problems came to light.
For further reading, also see:
Matthew Mosk,
The $75 Million Woman. Barack Obama's finance director helped transform a fledgling campaign into a fundraising machine, Washington Post, October 8, 2007.
The Pritzkers' Empire Trembles. Can a new generation halt the slide in the family's fortunes?, Business Week, September 10, 2001.
Christian A. Johnson, Justice and the Administrative State: The FDIC and the Superior Bank Failure, Loyola University Chicago Law Journal, Vol. 36, 2005.
http://www.illinoistimes.com/gyrobase/Content?oid=oid%3A3015
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