The American Spectator

Special Report

Obama in the Tank for Pritzker

By Edward Sisson on 9.26.08 @ 12:09AM

(Page 4 of 4)

And what happened to the two key executives who Penny Pritzker approved as managers of Superior after she led Superior into the risky subprime market? The regulators at the Office of Thrift Supervision forced Nelson Stephenson and William Bracken not only out of Superior, but out of the banking industry altogether, issuing "cease and desist" orders against each of them in August 2002.

The questionable accounting artificially propped-up the asset values and enabled Superior Bank to pay $201 million in dividends to Coast. When the accounting fiction could no longer be maintained, did Penny Pritzker at least offer to pay back the dividends? Not according to the Department of Justice:

And ultimately, as noted above, when Superior Bank failed and its top two executives were forced out of the industry by cease-and-desist orders, the Pritzker family paid $460 million to escape similar actions against her and other Pritzker executives responsible for Superior Bank's collapse.

Engmann concludes that Superior Bank failed because the management and board of Superior Bank and of its holding company Coast (which included Penny Pritzker) led Superior Bank "to concentrate its assets too heavily in high-risk, residual assets resulting from securitizing and servicing subprime loans" which "significantly decline[d] in value," but that the "use of certain accounting treatments...masked the declines in the value of the residual assets until 2001."

Engmann also notes that the bank "paid $201 million of dividends to its parent [Coast, where Penny Pritzker was on the board] that reduced [Superior Bank's] capital" and that the bank "incurred negative cash flows which contributed to its failure."

Engmann reports that the owners and managers of Superior Bank ignored repeated warnings by government bank regulators that they were loading-up the bank with too-risky assets. Engmann quotes OTS examination report warnings in the reports dated July 6, 1993; August 8, 1994; September 11, 1995; October 27, 1997; and January 24, 2000.

Because Superior Bank's owners, including Penny Pritzker, ignored these prominent warnings from regulators, the government ultimately was forced to seize the bank.

OF COURSE, AS A BANK OWNER and manager, Penny Pritzker ought to have recognized and corrected the high-risk problems in her bank without receiving any government warnings at all. Certainly a serious and reliable candidate for President would not choose as a key member of his campaign a bank director who needed repeated warnings from regulators before recognizing serious problems in her own bank. A serious and reliable candidate for President would certainly not choose someone who not only didn't see the problems on her own, but didn't act to solve those problems even after regulators repeatedly pointed out to her those problems.

Presidential nominee Barack Obama tells us that he will fix the banking system by imposing more regulation. Yet the person he chose to serve as his own campaign finance chief ignored the banking regulators who tried to rein in her own bank's out-of-control, profit-motivated risk-taking. And this was documented before he chose her, in numerous government studies as well as in public court filings, throughout Barack Obama's term as a Senator of the United States. Before he organized his run for the Presidency. Before he chose failed bank director Penny Pritzker to raise the funds for his campaign.

Our next President's first and most vital job on taking office in 2009 will be to solve today's severe banking crisis -- a crisis that former Fed Chair Alan Greenspan called a once-in-a-century banking crisis. Senator Obama offers America transparently false excuses about Penny Pritzker's key role in the more than $400 million failure of Superior Bank. He has been all too willing to be fooled into believing her excuses, into promoting her excuses to America, and to not investigate the facts of why her bank failed. Barack Obama is obviously not a man who, as a President, can be trusted to keep our banks safe.

Letter to the Editor

topics:
Health Care, Barack Obama, Business, Law, NATO