WASHINGTON – President Barack Obama’s nominee for commerce secretary was questioned briefly about her ties to a subprime mortgage lender that failed in 2001 and her role as a beneficiary of family offshore trusts in the Bahamas, but those were minor bumps in an otherwise smooth Senate confirmation hearing Thursday.
Chicago billionaire business executive and philanthropist Penny Pritzker is a longtime Obama friend who raised hundreds of thousands of dollars for both of his presidential campaigns.
If she wins confirmation, Pritzker would become the fourth woman serving as secretary in Obama’s current Cabinet. She also would be the wealthiest in the Cabinet by far, with Forbes estimating her net worth at $1.85 billion and ranking her as the 277th richest American. The commerce post has been vacant since John Bryson resigned last summer.
The Pritzker family had co-ownership of Superior Bank, a Chicago-area thrift which failed in 2001 after losing millions of dollars on risky mortgage loans to borrowers with bad credit. Pritzker told the Senate Commerce Committee she felt “very badly” about the failure of the thrift.
“I regret the failure of Superior Bank,” she said.
Pritzker stressed that she stepped down as chairman of the bank in 1994, seven years before it failed.
With about $1.7 billion in assets, Superior was at the time the largest insured U.S. financial institution to fail since 1992. It cost the deposit insurance fund $286.3 million.
Federal regulators blamed risky business strategies by Superior’s management for the collapse, but they also cited failures on the part of its auditor, Ernst & Young.
The Pritzker family and its partner in Superior agreed to pay $460 million without admitting any liability in a settlement with the regulators. In exchange, the owners were allowed to receive 25 per cent of any money the government recovered from Ernst & Young, which came to about $31 million.
Sen. John Thune of South Dakota, the top Republican on the Commerce panel, cited criticism from Sen. Charles Grassley, R-Iowa, and other Republicans who say it’s hypocritical for Obama to nominate Cabinet members who benefit from offshore tax havens while he has criticized that practice for others. Obama’s re-election campaign criticized GOP presidential nominee Mitt Romney’s offshore accounts.
Pritzker said she’s the beneficiary of offshore family trusts that were set up when she was a little girl.
“I didn’t create them,” she said. “I don’t direct them. I don’t control them.”
Pritzker added that she has asked the offshore trustee to appoint a U.S. trustee instead.
Thune was the only committee member to ask Pritzker about the failed thrift and her family’s offshore accounts in a cordial hearing that focused largely on Pritzker’s views on business, trade, cybersecurity, tourism and the economy.
When the hearing ended, Thune told reporters that while he had a “few loose end” questions about Pritzker’s role in the failed thrift and offshore accounts, he was impressed with her broad business background.
“We haven’t seen anything in there that would be disqualifying in her record or her background,” Thune said. “I can’t see that there’s anything that would keep her from getting through the process in pretty good shape.”
Sen. Roy Blunt, R-Mo., praised Pritzker’s business acumen. Sen. Ted Cruz, R-Texas, praised her support for free trade.
Pritzker has led several companies and currently serves as chair of investment firms Pritzker Realty Group and Artemis Real Estate Partners. She’s also on the board of the Hyatt Hotels Corp., the chain co-founded by her father. She has donated generously to education and the arts.
Unite Here, which represents Hyatt workers, is opposing Pritzker. The union accuses Hyatt of opposing higher wage standards and replacing longtime housekeepers with minimum wage temporary workers. The union had about 30 workers, many wearing red t-shirts emblazoned with “Unite Here,” at the hearing.
Wanda Rosario, 61, said she lost her $15-an-hour job as a housekeeper at a Boston Hyatt in 2009 after 23 years on the job. She said she and co-workers were replaced by lower-wage workers she helped train.
Rosario said she did not trust Pritzker to put the welfare of workers ahead of making money.
“They put the profit before the worker,” Rosario said.