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Sub-Prime Mess Likely to Surface in Commerce Secretary Confirmation

The news that President-elect Barack Obama may pick his national finance chair, Penny Pritzker, for secretary of commerce raises a couple of questions.

Pritzker, a Chicago billionaire and hotel heiress, was a major contributor to Obama’s presidential campaign and ran his record-breaking fund-raising juggernaut. This alone would seem to be problematic for a president-elect who ran on a platform of change. From The Washington Post:

Commerce is not a high priority slot at the moment, but ever since the election, Obama advisers have worried about the “business as usual” appearances of giving Pritzker a job tinged by cronyism. Most Commerce secretaries in recent decades were major donors for the presidents they served, the type of old-style practice that Obama has pledged to purge.

But Pritzker allies also were confident that Pritzker herself would quickly depart from tradition by applying to Commerce the same exacting standards and bristling energy that made her the most successful finance chair in campaign history.

However, her position in the campaign would not be the only troublesome aspect of the pick.

The Chicago-Sun Times reported in April that Pritzker was a former chair of the board of Chicago’s Superior Bank, which failed in 2001 after making large amounts of sub-prime loans. While Pritzker stepped down as chairwoman in 1994, she remained on the board of the bank’s holding company.

[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.

According to The Sun-Times, the Obama campaign said Superior did not pursue the predatory sub-prime loans at the heart of the current financial crisis. But given the likely state of the economy when Obama takes office in January, having to explain away a cabinet nominee’s connection to the sub-prime debacle is not exactly the way Obama would like to begin his presidency.

Coupled with Pritzker’s prominence as a campaign fund-raiser, her appointment seems to have the potential to scuff the new administration’s shiny change facade.

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