Sam Smith - How the Koch brothers helped dismantle the Democratic Party

[Human101948]

5. The people behind the scenes...another one is Penny Pritzker, Sec. of Commerce...

Penny Pritzker played a leading, decision-making role in the lead-up to the failure, which ultimately lost 1,400 depositors an estimated $10 million and cost the Federal Deposit Insurance Corporation approximately half a billion dollars. After the Pritzkers and a family friend took over a failed suburban Chicago bank on very favorable terms in 1988, they began aggressively pursuing high-interest, high-risk subprime loans. They were able to repackage the loans in securities given an investment grade, Anderson says, because they promised to replace any failed mortgage with a good one. But as they pumped out profits for themselves, they eventually failed to live up to their promises, including a pledge to invest more capital.

Bert Ely, a prominent bank consultant, says that Superior Bank “was a really sleazy operation” and “pretty gross.” The bank essentially told others in the business to “bring us your crappiest loans you’ve got and we’ll securitize them.”

In 2001, the bank collapsed. But thanks to an unusual deal with the FDIC that allowed the Pritzkers to share in a lawsuit against the bank’s auditors, Penny and her family ultimately profited from the failure. They “didn’t own up to their responsibility,” says Ely. “My estimate is that the owners of Superior ended up making big money on the deal after taking into account tax laws, and it’s unconscionable that they made money while pensioners lost money.”

http://inthesetimes.com/article/14948/3_troubling_things_about_billionaire_penny_pritzker