John W. Courtney’s world collapsed at dinnertime on a Friday in July 2001. That’s when he learned from a television newscast that much of the $200,000 that he had saved from his construction job over a 30-year period was lost when his Chicago-area bank was shut down after pursuing a failed strategy of subprime loans.
Seven years later, the Vietnam War veteran has yet to recoup $85,000 of his uninsured losses from Superior Bank’s failure. And he watches in disbelief as one of the bank’s former top officials, billionaire hotel heiress Penny Pritzker, leads the record-breaking fundraising machine of Democratic presidential candidate Sen. Barack Obama.
Mr. Courtney, now 63, wonders aloud how Mr. Obama could rail on the campaign trail against the national financial crisis started by subprime lending while allowing a former advocate of the practice to hold the senior position of finance chairwoman in his campaign. The candidate has even lauded Ms. Pritzker’s business practices as a model for an Obama administration.
“He knows the Pritzker family. He knows what happened in Illinois. He knows that Superior Bank was one of the first to securitize subprime mortgages,” Mr. Courtney said. “He talks about change and helping people find a better way of life, but he has distanced himself from the fact that Superior helped ignite the nation’s subprime crisis and that Penny Pritzker and her family walked away from it and us.”
The Obama campaign does not dispute that Ms. Pritzker advocated subprime lending as the bank was failing but said she was “never accused of any wrongdoing nor did she receive compensation in relation to the closing of Superior Bank.” The campaign said that instead of “walking away as millions of homeowners and stockholders suffered, the Pritzker family entered into a voluntary settlement and agreed to pay the government” $460 million that the bank cost taxpayers over 15 years to defray its losses.
That’s little solace to the victims of Superior Bank’s failure, who are still attempting to recoup their losses via a lawsuit and feel left behind in the current financial crisis, which was spurred, in part, by the very same subprime lending that sank their deposits.
“Ms. Pritzker should be fired by the Obama campaign because of how these matters were handled,” said Anne MacKay of Arlington Heights, Ill., whose aunt Irene Kortas’estate is still owed about $40,000 from the $209,000 she lost when the bank closed seven years ago. Miss Kortas died at age 79, one year after learning that her savings had been lost.
“She trusted these people and she trusted the Pritzker name, which is well-known in Chicago,” Mrs. MacKay said. “They had given her a toaster and a set of glasses, but obviously they didn’t know what they were doing when it came to protecting her investment.”
A ‘complex’ failure
Ms. Pritzker, now chairwoman of Classic Residence by Hyatt, a chain of luxury senior living communities throughout the United States, is listed among Forbes’ magazine’s 2008 richest Americans with a net worth of $2 billion.
She serves as both the finance chairwoman overseeing Mr. Obama’s fundraising as well as one of his “bundlers,” who have pledged to personally raise between $200,000 and $500,000 for the candidate. She has contributed nearly $500,000 to Democratic candidates and political action committees since 2000.
Her attorney, Kevin Poorman, said Ms. Pritzker had stepped down from day-to-day management as the bank’s chairwoman in 1994 for a role instead on its parent company’s board of directors and had “little to do” with the bank’s daily operation by the time it failed. Still, Mr. Poorman confirmed that she did write a letter as late as May 2001 urging the bank to make an expanded push into subprime loans in an effort to save itself.
Critics have cited that letter as evidence of Ms. Pritzker’s continuing stewardship of the bank and her advocacy for a subprime lending practice that Mr. Obama has criticized. In the letter, Ms. Pritzker wrote that her family was recapitalizing the bank and pledged to “once again restore Superior’s leadership position in subprime lending.” The bank was shut down two months later.
Mr. Poorman said the letter was based on information from a bank accountant that later turned out to be inaccurate.
“The financial statements she relied on had been audited and previously approved by regulators, but were overstated and, as a result, the bank was not capitalized sufficiently,” the attorney said. “No one regrets that the bank failed more than Ms. Pritzker.”