WASHINGTON -- President Barack Obamas choice to be the new secretary of commerce is a powerful Democratic fundraiser and hometown friend whose familys role in a controversial bank failure might raise questions during her Senate confirmation.
Obama announced his nomination of billionaire Penny Pritzker in a Rose Garden ceremony Thursday, along with his nomination of national security aide Michael Froman to head the Office of the U.S. Trade Representative. The president described both as longtime friends, joking that Froman was a law school classmate who was much smarter than me then. He continues to be smarter than me now.
The more controversial pick is Pritzker, who runs an investment company and a real estate group and sits on the board of the Chicago-based Hyatt Hotels Corp. chain, founded by her uncle. Her net worth approaches $2 billion.
The Chicago resident served as the campaign finance chairwoman for Obamas 2008 national campaign, and shes donated tens of thousands of dollars of her own money since 1997 to the Democratic National Committee, political action committees and individual campaigns.
Penny is one of our countrys most distinguished business leaders, the president said. Shes got more than 25 years of management experience in industries including real estate, finance and hospitality. Shes built companies from the ground up.
Her financial and political background might cause problems for her confirmation by the Senate, however.
She was accused of being anti-union during her time on the Chicago school board. Chicago Teachers Union officials told the Chicago Tribune in March that Pritzker had a long and storied history of being anti-union and anti-worker, both on the school board and on the Hyatt board.
More problematic might be her familys role in Superior Bank, a thrift that was seized by the Federal Deposit Insurance Corp. in July 2001 and was half owned by the Pritzker family. The case at the time represented one of the largest lender failures since the late 1980s.
The Pritzkers and business partners bought the lender from the government during the resolution of the savings and loan crisis. The new Superior Bank pioneered the packaging of subprime loans into complex securities, and its failure was an early warning about the financial crisis that would unfold in 2008.
The Pritzkers didnt want to just make money, they wanted to make some big money, said Tim Anderson, a retired Chicago-area bank consultant whose probing of Superior garnered attention in 2003.
Superiors failure was the subject of an inquiry by the Senate banking committee in late 2001. Then-FDIC Director John Reich said in written testimony that increasing levels of high-risk subprime assets at Superior had worried regulators, who began scrutinizing it and seized it after the Pritzkers and partners failed to implement the capital plan worked out with regulators.
In a settlement with federal regulators, the Pritzker family and other bank co-owners agreed to pay regulators $100 million right away and another $360 million over 15 years.
I am proud of how I and my extended family dealt with the matter, Pritzker told The Wall Street Journal in a July 21, 2008, article.
The White House said Thursday that she wasnt personally involved.