by Ben Nanamaker | May 2, 2013 8:15 pm
President Barack Obama’s nomination of Penny Pritzker, a top campaign fundraiser and heir to the Hyatt (NYSE:H) hotel fortune, is widely seen as a prize for her efforts. For many, it might also be seen a slap in the face.
In a CBS News article, Pritzker was also noted as a frontrunner to the subprime mortgage crisis that helped drag the United States into recession in 2007-2008. In 1988, Pritzker’s family and a partner bought a failed bank for $42.5 million, receiving $645 million in tax credits in the process. After renaming the bank (from Lyons Savings Bank to Superior Bank), they bought Alliance Funding, which soon moved into subprime lending.
Superior Bank was one of the first banks to do such risky lending, one of the first banks to bundle off those risky loans and sell them as securities, and also one of the first banks to fail as a result. By 2001, Superior Bank had collapsed.
Penny Pritzker was instrumental in pushing the subprime policy, writing in a letter that “[o]ur commitment to subprime has never been stronger” and insisting the bank would be recapitalized two months before it failed.
Besides being an early example of the bad lending policies that helped drag down the U.S. economy, Pritzker has few friends among the labor movement. Hyatt has had several disputes with its labor force, and there was little love for her from the Chicago Teachers Union during her time on the Chicago Board of Education.
The Chicago Teachers Union president, Karen Lewis, had harsh words for Pritzker when she resigned her seat on the board.
“Penny Pritzker has a long and storied history as being an anti-labor, anti-worker kind of boss. he has supported policies that have had an adverse impact on working-class families and their children. As a member of the board of education, she has worked to close schools, destabilize neighborhoods and disrupt the economic lives of thousands of public school employees.”
So while few people are surprised that Obama’s rewarding one of his top moneymakers during the 2012 campaign, Pritzker could face significant backlash from union advocates and those who were stung by the subprime mortgage crisis.
— Benjamin Nanamaker, InvestorPolitics Editor
The opinions contained in this column are solely those of the writer.
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