Obama Bundler Who Oversaw Bank Collapse May Get Cabinet Nod
Penny Pritzker, heiress to the Hyatt Hotel fortune, has been an important backer of Barack Obama's political career. A fixture of Chicago Democrat politics, billionaire Pritzker has bundled tens of millions of dollars in contributions to Obama's campaigns. She helped him navigate the monied corridors behind political power in the city, smoothing his rise to national office. According to recent news reports, her loyalty will be rewarded as Obama is expected to tap her to be the next Commerce Secretary.
She reportedly had been under consideration for the same post at the beginning of Obama's first term. She was forced to withdraw her name from consideration, however, largely because of questions about her role in the failure of a large bank in suburban Chicago. That her name would again be floated for consideration is evidence that Obama feels emboldened by his reelection.
In the 1980s, Pritzker's uncle, the then patriarch of the family, organized the family's purchase of Superior Bank, a failed Savings and Loan based in Hillsdale, IL. Pritzker was installed as Chairman of the bank. In her tenure, the bank aggressively marketed subprime loans and packaged them into securities sold to investors, the very instruments that blew up the financial markets in 2008.
Superior was an early casualty of the unsustainable business of selling mortgages to borrowers who couldn't afford them. By 2001, regulators had seized the bank and shut it down. In legal action since the closure, the Pritzker family agree to pay around $400 million in restitution.
If Obama picks Pritzker, she would be the second Cabinet nominee with some tie to the financial crisis. Obama's pick for Treasury, Jack Lew, was an executive at Citigroup in the lead up to the financial melt-down. He oversaw an internal risk fund that blew up, costing the bank hundreds of millions of dollars.
The financial implosion in 2008 is not some distant memory. In important ways, it is still acting as a drag on the economy. It has prompted the federal government to borrow trillions of dollars to prop up the economy and weak banks. Putting two supporting actors of the crisis into important policy-making government positions would be unthinkable for most politicians.
Obama, however, is not like most politicians. He has interpreted his reelection as a personal mandate to pursue the policies he wants. For him, it is also a mandate to reward his friends and supporters. Their loyalty to him trumps whatever it is that they've done.