Good news: Likely Obama nominee for Commerce notorious for subprime lending; Update: Pritzker drops out

posted at 12:30 pm on November 20, 2008 by Allahpundit

Did I say “likely”? That’s because this CNN story cited sources last night claiming that Penny Pritzker was in fact the pick. And now, come the morning, all references to her have been scrubbed and WaPo’s reporting that her appointment’s most unlikely indeed. For “business reasons.”

The early favorite for the job, Pritzker may take herself out of the running soon, sources said. Pritzker was the first campaign insider and “Friend of Barack” to surface as a possible Cabinet pick.

Pritzker had started a review of her vast financial holdings, weighing whether she could disentangle herself to the extent necessary to meet Obama’s strict standards for service in his administration. Assuming she could, and wanted to, Obama sources said, the job would be hers.

It’s a testament either to The One’s loyalty (she was his finance chair) or to his absolute confidence that the Democrats are bulletproof on the Fannie/Freddie meltdown that he’d consider rolling the dice on this confirmation. Pritzker, you see, was securitizing subprime mortgages long before securitizing subprime mortgages — and driving the economy into a ditch — was cool:

Ms. Pritzker served as Superior [Bank] chairman until 1994. During that period, Superior “embarked on a business strategy of significant growth into subprime home mortgages,” which were then packaged into securities and sold to investors, according to a 2002 report by the Treasury Department’s Inspector General.

“Superior was at the forefront of the securitizing of subprime mortgages,” says Timothy Anderson, a retired bank consultant who has studied Superior and other failed thrifts.

Said Anderson elsewhere, in a line heaven-sent for confirmation-hearing soundbite immortality, “Superior’s owners were to sub-prime lending, what Michael Milken was to junk bonds.” And, true to form, it blew up in her face:

One of the banks that went under after making a lot of subprime loans — leaving 1,400 of its customers without part of their savings — was Chicago’s Superior Bank…

[A] letter obtained by the Chicago Sun-Times shows that until the end, Pritzker appeared to be taking a leadership role in trying to revive the bank with an expanded push into subprime loans.

Pritzker wrote in May 2001 that her family was recapitalizing the bank, and she pledged to “once again restore Superior’s leadership position in subprime lending.” The bank shut down in July 2001…

“They still owe me $113,000,” said Fran Sweet, 63, of Downers Grove, who deposited her $480,000 retirement account at Superior a month before it collapsed. “To the Pritzkers, this is nothing. They probably think, ‘Why pay her back?’ That’s nothing. But we’re all upset that someone who made these decisions could be in that position.”

The reasons for the bank’s failure were “complex,” Pritzker insists. Exit question: Aren’t the Democrats bulletproof on Fannie/Freddie? The congressional face of the meltdown not only won reelection, but his new project is trying to balloon a bailout for the Big Three into nine-figure territory. Americans don’t care and Obama has political capital to spare. Why not push Pritzker at Commerce and kick Uncle Barney upstairs to Treasury for good measure?

Update: She’s going to take one for the team: Pritzker says no, thanks to “vetting issues.”


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