Time for a little stroll down memory lane. This is what I wrote about Penny Pritzer, Obama's just-announced appointee as Commerce Secretary, back in February:
Penny Pritzker, union buster.
Penny Pritzker, sub-prime lender who drove Superior Bank into the ground.
Penny Pritzker, Chicago Board of Ed members who thinks your children only deserve enough education to make them a member of the workforce.
Penny Pritzker, billionaire tax dodger.
Penny Pritzker, potential Secretary of Commerce nominee? Is this a joke?
No, it was not. Okay, just kidding. Yes, it was. The joke's on us. Ha, ha!
(MoneyWatch) The position of U.S. Commerce Secretary has often been a political plum for top fundraisers, so it was no surprise that President Obama continued that tradition today when he named Penny Pritzker, the Chicago billionaire heiress to the Hyatt fortune.
Said to be worth nearly $2 billion, Pritzker put together nearly $800 million for Obama's presidential campaigns.
Pritzker's appointment shows that the administration is abandoning even a fig leaf of a relationship with labor unions -- Hyatt has had many run-ins with its work force, and Pritzker herself was deeply unpopular with the Chicago Teachers Union during her tenure on the Chicago Board of Education.
The appointment also suggests the administration is betting that people don't care much anymore about the subprime meltdown that succeeded in bringing the world to the brink of financial ruin. Her role in the banking business may startle those not familiar with the history of the subprime meltdown.
The Pritzker family, along with a partner, bought the failed Lyons Savings Bank in 1988 for $42.5 million, getting $645 million in tax credits in the process and rechristening it Superior Bank. Under Pritzker, who served on the board, Superior bought Alliance Funding, which moved aggressively into subprime lending.
Bert Ely, an independent banking analyst who testified about the failure of Superior, noted the garish pitch the bank was making at the time. "I remember the basic message to mortgage brokers: 'Send us the applications that no one else will accept.' "
As one of the earliest pioneers of risky loans that were then bundled off and sold as securities, Superior was also one of the practice's earliest casualties: The bank collapsed in 2001. "The kinds of lending they were doing were outrageous," Ely said. "But what was also outrageous was that when Superior failed -- there were a lot of uninsured depositors who took losses. It was more outrageous given the wealth of the family, which may have walked away without any losses."
Tim Anderson, a retired banking consultant who has written and testified about the failure of Superior, said Penny Pritzker played a direct role in persuading people to park their money in a bank that was taking wild-eyed risks. He points to a letter she wrote in May 2001 to bank employees and managers, assuring them that the bank was being recapitalized. But while that pledge of support may have convinced people that the bank was sound, the recapitalization never occurred. In fact, the bank failed two months later.
The letter was also indicative of the approach the bank was taking, and of Pritzker's hands-on role in strategy. "Our commitment to subprime has never been stronger," she wrote.