President Obama nominated longtime fundraiser and hotel heiress Penny Pritzker on Thursday to run the Commerce Department, gambling that her role in a failed bank, her personal finances and opposition from labor groups won’t derail her Senate confirmation.
The president also named national security aide Michael Froman as the next U.S. trade representative, rounding out the major appointments for his second term.
The nominations complete the president’s second-term Cabinet, which faced early criticism from some minority groups for a lack of diversity. If the Senate confirms Ms. Pritzker, she will be the fourth woman in the Cabinet. Mr. Obama on Monday nominated Anthony Foxx, the black mayor of Charlotte, N.C., to become transportation secretary. If confirmed, he would be the second black in the president’s Cabinet, joining Attorney General Eric H. Holder Jr.
Ms. Pritzker, whose father founded the Hyatt hotel chain, has a net worth of $1.85 billion and gave crucial financial backing for Mr. Obama’s rise from an obscure Illinois state senator to president. She raised hundreds of thousands of dollars for his presidential campaigns, and served as finance chairwoman for Mr. Obama’s race in 2008.
National Association of Manufacturers President and CEO Jay Timmons hailed her nomination.
“Penny brings to the table an extensive business background and understands what it takes for businesses to create jobs,” he said.
But Iowa Sen. Charles E. Grassley, the ranking Republican on the Senate Finance Committee, said he plans to question Ms. Pritzker about her use of offshore tax havens.
“Every nominee’s offshore tax-avoidance activities should be examined as part of the nomination process,” Mr. Grassley said. “This is the second nominee in a row, [Treasury Secretary] Jack Lew being the first, who’s associated with the kind of tax avoidance activity that the president dismisses as fat-cat shenanigans for others. It’s hypocritical to overlook tax avoidance when it’s convenient.”
Ms. Pritzker, who celebrated her birthday Thursday, could also face scrutiny in the Senate over the collapse of Superior Bank, which was co-owned by her family. The Hinsdale, Ill.-based bank was involved in subprime mortgage lending, and its failure in 2001 prompted accusations of mismanagement and fraud. About 1,400 customers lost part of their savings.
When Ms. Pritzker came under fire during the 2008 presidential race for the bank’s collapse, the Obama campaign and her attorney said she had stepped down from the bank’s day-to-day management in 1994. But she wrote a letter as late as May 2001 urging the bank to make an expanded push into subprime loans in an effort to save itself.
She wrote that her family was recapitalizing the bank and pledged to “once again restore Superior’s leadership position in subprime lending.” Regulators shut down the bank two months later.
Ms. Pritzker said in 2008 that she regretted the failure of Superior but added that it received high ratings from regulators while she was chairwoman.
“Superior’s failure was complex,” she wrote on the Obama campaign’s Web site. “In short, the bank failed in 2001 because regulators concluded that the valuation of certain assets in Superior’s financial statements, which had been audited by Ernst & Young for many years and previously approved by regulators, was overstated and as a result the bank was not capitalized sufficiently. My family voluntarily agreed to pay the FDIC [$460 million] to help defray costs incurred by the government and other losses in connection with the bank’s closure.”