News Release

Obama Finance Chair Tied to Sub-Prime Disaster

DENNIS BERNSTEIN
Bernstein just wrote the piece “Obama’s Sub-Prime Conflict” for ConsortiumNews.com.

He said today: “During a recent campaign stop in south Texas, Obama met with San Antonio-area residents who had been particularly hard hit by the sub-prime meltdown. He expressed dismay over how lobbyists for the sub-prime lending industry had spent more than $185 million in the last several years for their cause.

“Penny Pritzker, a member of one of America’s richest families and the current finance chair for the presidential campaign of Barack Obama, was the chair of Chicago-based Superior Bank’s board for five years. Superior Bank went belly up in 2001 with over $1 billion in insured and uninsured deposits; 1,406 depositors lost much of their life savings. This collapse came amid harsh criticism of how Superior’s owners promoted sub-prime home mortgages.”

Bernstein is an award-winning investigative reporter and public radio producer. He is co-host and executive producer of the daily radio news magazine, Flashpoints, on Pacifica Radio.

TIM ANDERSON
Anderson, a Chicago-based specialist in banking regulation who reported on much of the Savings and Loan scandals of the 1980s has closely examined the collapse of Superior Bank and the role of the Pritzker family.

He said today: “The Pritzkers like to say they did sub-prime lending to help the disadvantaged, but it would be more accurate to state they ran a very large nationwide predatory lending operation. They approached people who already had homes and convinced them to re-finance with unfavorable conditions through predatory lending.

“The sub-prime financial engineering that created the Wall Street meltdown was developed by the Pritzkers and Ernst and Young, working with Merrill Lynch to sell bonds securitized by sub-prime mortgages. Superior’s owners were to sub-prime lending what Michael Milken was to junk bonds. Their sweetheart settlement with the government precluded criminal prosecution for their conduct and let them walk away with hundreds of millions of dollars. Pritzker should resign immediately as finance chair of the Obama campaign.

“One may ask why the Clinton campaign hasn’t raised all this. Well, Penny’s younger brother, Jay Robert ‘J.B.’ Pritzker, is national chairman of Citizens for Hillary. This is a very connected, very sophisticated family.”

Anderson is a whistleblower on financial and bank fraud, and has been profiled as a “hellraiser” in Mother Jones magazine.

CLINT KRISLOV
Krislov, a Chicago-based attorney, said today: “We sued, seeking recoveries for the depositors in Superior Bank, and asked the court to void the FDIC’s special deal, by which, for the first time in the history of the federal banking system, the owners of a failed bank got money back while depositors were left short. As Superior’s chairman, Penny Pritzker was sued personally, along with others…

“We were greatly disappointed that the courts permitted the FDIC to ignore the strict statutory payout priorities which require depositors to be paid in full before the bank’s owners can receive anything. Unfortunately, the Supreme Court chose not to step in. The result is that these 1,400 people lost millions of dollars of their life savings, trusting in the federal banking system and laws, Superior Bank and the Pritzkers, who owned and controlled the bank 50/50 with the Dworman family.

“Sadly, this is a story of the two Americas that exist; with two sets of laws, one for the rich and powerful and another for the rest of us. Superior Bank’s shareholders, the Pritzker/Dworman group, obtained a special, unprecedented deal from the FDIC. Avoiding the redress imposed on other owners of cooked-book failed banks, such as Charlie Keating’s prosecution for the Lincoln Federal disaster, and Bert Lance for the paltry $6 million self-dealing loan, the Pritzker/Dworman group reaped hundreds of millions of dollars in tax benefits, plus hundreds of millions more, by unsupported dividends and a $100 million self-dealing loan, paid back only a portion, and got allocated 25 percent of the bank’s recovery from the accountants who cooked the books for them. They actually leapfrogged depositors and walked away with hundreds of millions of dollars while people who trusted them with their life savings lost their shirts. Even the federal government winds up losing nearly $400 million — one of the largest-cost bank failures since the depression of the 1930s.

“We’ve been unable to find any other instance in U.S. banking history in which the FDIC gave failed bank shareholders preferential treatment, while leaving depositors and taxpayers holding the bag for a combined loss of $500 million. Usually the managers and owners have ended up in jail; in this case, they ended up sitting pretty.”

Background:

A letter dated July 3, 2000 from the National Community Reinvestment Coalition (an association of more than 600 community-based organizations that promote access to basic banking services) to the Office of Thrift Supervision, on “regulations to ensure that minority, low- and moderate-income, and elderly borrowers are fully protected from predatory lenders,” devotes a section to Superior Bank and states that “at best, [Superior Bank’s] sales pitch is on the edge of propriety.” PDF available.

The New York Times reported Dec. 11, 2001: “The Pritzkers, one of the nation’s wealthiest families and heirs to the fortune created by the Hyatt hotels, agreed today to pay a record $460 million to the federal government to avoid being punished for the failure of Superior Bank F.S.B., the big savings and loan institution that regulators seized last summer.”

For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167