Billionaire Obama campaign finance chair Penny Pritzker did the smart, maybe the only, thing she could when she quickly scotched talk that she wanted to be Obama's Commerce Department Secretary. Pritzker says she doesn't want the post because she can better help the administration by doing her part to create businesses and jumpstart the economy. That's admirable and probably heart felt. But Pritzker also knows a little something about politics too. If her name had ever gone up to the Hill it would have ignited a firestorm that could have blown back on her boss.
Pritzker and her failed Chicago based Superior Bank were knee deep in the subprime lending mess. The bank engaged in deceptive and faulty lending, questionable accounting practices, and charged hidden fees. It did it with the sleepy-eyed see-no-evil oversight of federal regulators. It made thousands of dubious loans to mostly poor, strapped homebuyers. A disproportionate number of them were minority.
For a time Obama's home state, Illinois, ranked near the top of the states in the percentage of sub-prime mortgages. Nearly 15 percent of home loans were sub-prime according to the Mortgage Bankers Association. But that only tells part of the tale. According to the Woodstock Institute, a Chicago non-profit that studies housing issues, the sub-prime fall-out was far higher in the predominantly black and Latino neighborhoods of South and Southwest Chicago.
The predictable happened when many of the distressed homebuyers lost their homes. When the bank collapsed Pritzker and bank officials skipped away with their profits and reputations intact.
Obama certainly well knew the ruinous impact that subprime lending had on the lives of thousands of homeowners who when rates inevitably jumped could no longer afford keep up their payments. Subprime lenders like Superior Bank were probably the single biggest cause of the financial meltdown; a fact also well known to Team Obama.
In an early campaign rally in San Antonio, Texas Obama slammed the CEO of a sub-prime lender for greedily snatching at a $100 million buy out package while thousands of home borrowers that his company snookered into loans at below market rates faced foreclosure or the threat of foreclosure. Months later at another campaign stop in Redding, Pennsylvania, Obama again blasted the sub prime con artists. He accused them of making money hand over fist off the misery of desperate, distressed homebuyers. This was a huge campaign sale point to the state's blue collar workers in his ultimately successful effort to bag must win Pennsylvania.
This writer and others publicly questioned Obama on how Pritizker could be his top money raiser when he knew that her old bank had wreacked so much financial damage. The Obama campaign responded that Pritzker was not charged or accused of any criminal wrongdoing, and the Pritzker family entered into a voluntary settlement and agreed to pay the government $460 million to defray its losses. Pritzker defenders noted that she had stopped playing any active role in the bank long before it collapsed. That was a stretch.
Seven years after she had allegedly ceased any active role with the bank she wrote a letter saying that her family would recapitalize the bank and restore Superior to a top spot among the leaders in sub prime lending. The only thing apparently that stopped that from happening was the bank's collapse in July 2001.
Obama has lightly called for a moratorium on lending, for tough civil and criminal penalties for lenders that engage in deceptive lending practices, and an interest rate freeze. It would look awfully funny for him to talk about any of these things with Pritzker as one of his administration's top business advisors and as his administration's overseer of the effort to stimulate businesses and banking. A Pritzker nomination would leave him wide open to the charge that he laddled out a plum administration post to a friend and confidant who engaged in questionable, even hurtful business practices.
That's the kind of charge and controversy that Obama doesn't need. Pritzker did him, herself, and probably the thousands of other bilked homeowners who still blame her family bank for their misery, a favor by bowing out of Commerce. That is if indeed she did bow out. Stay tuned.
Earl Ofari Hutchinson is an author and political analyst. His forthcoming book is How Obama Won (Middle Passage Press, January 2009).
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