Tuesday, July 22, 2008

The Obama/Prtizker PR Machine Fires Back (with Blanks)

The PR machines and political supporters are busy, scrounging the net and blogs for anything that might be detrimental to a political candidate or a powerful Squaliforme.

Take the first published comment to the previous post. Then take the blog the author points to for what it's worth - they're firing blanks.

Let’s dissect this flimsy public-relations exercise:

Claim 1: Penny Pritzker had no ownership in Superior. She did not profit or receive compensation, except minimal directors' fees. She and her extended family lost a great deal of money from this investment.”

OK, let’s see just how that works – “[she] and her extended family lost a great deal of money from this investment,” yet Penny Pritzker allegedly had “no ownership in Superior"??? Unfortunately, the author of this fluff piece misses the dichotomy, especially when claim 2 is made:

She and her extended family agreed to pay the largest amount in the history of U.S. banking to the federal government: $460 million although they owned just 50% of the bank.”

You can’t have it both ways – the Pritzkers either did or didn’t own 50% of the bank and Penny is, after all, part of that “extended family” that “lost a great deal of money from this investment.” If we are supposed to be concerned that they, as half owner, paid while the other half didn't, that was their decision, which brings me to,

Claim 2: “They made the agreement because "it was the right thing to do."

Wrong again – they made the agreement so they would not have to spend years in court and expose themselves and the bank’s management to civil and potentially criminal liability. It wasn't quite the 'get out of jail free' card they expected; it would have been a nearly $40 Million dollar windfall if their and the FDIC's legal strategy against Ernst & Young had worked out the way they had planned.

Because of these payments, uninsured depositors are expected to receive 80% of their uninsured funds.”

And we are to conclude what from that? Eventually those uninsured depositors are expected to “only” lose 20% of their deposited funds.

And let’s take another look at claim 3: When Penny Pritzker was chairman of the Superior Bank board of directors, Superior received high ratings from the Office of Thrift Supervision.

Wow. That’s a relief. The people asleep at the switch were consistently asleep at the switch.

Her primary focus as chair was to ensure that poor performing commercial loans Superior inherited from its predecessor, Lyons Savings & Loan, were cleaned up."

My “so what” light is blinking, and if anyone believes a Chairman's focus was that narrow I have some ocean-front property over here on this side of the Pecos I'd like you make an offer on before you get to see it. And they didn't 'inherit' poor performing loans - they BOUGHT Lyons and those poor performing loans with their eyes wide open.

"When this was completed in 1994, she left the bank board but did continue as a member of the board of directors of the bank holding company.”

The "so what" light is still blinking. If anyone believes there isn't any control exercised by a holding company over the executives of the companies it owns, I have another one of those ocean-front properties available. Holding company ownership has protections AND privileges, including picking up the phone and holding people you know on a first-name basis accountable for things.

Superior Bank was required to comply with applicable federal and state fair lending laws and practices. This was the bank's policy."

Ah, yes, the PR mantra of the squaliforme - "we're so regulated we couldn't do anything wrong."

"In addition, the bank's operating philosophy insofar as directors were aware was to follow ethical business practices. Loans and loan policies were overseen by the bank's management, officers, and employees.

(Emphasis added 1): The magic "I didn't know" defense. I wonder which member of the legal team came up with that one!

(Emphasis added 2): In other words – "we’re not responsible for the people in the company we owned." What part of Board of Directors and holding company oversight responsibilities do you believe they should get a pass on?

Board members of the holding company, Coast to Coast, were responsible to shareholders; Superior board members and officers were responsible for the bank.”

Now my BS detector is on full. This is one of the stupidest ploys I've seen in corporate PR dances in a long time. Let's see, the holding company owners were responsible to whom? Uh, just themselves. Sure. That makes more sense. And the people they as owners put on the Superior board were responsible for the bank. The owners were more than happy to risk hundreds of millions of dollars and not bother to keep an eye on what was going on. They trusted the Superior board and the officers - they must have; they bailed them out and protected them from further investigation and prosecution via the settlement. Now comes the PR slam, that it was the Superior board members and the bank officers that were responsible. Not the owners.

Losses related to Superior subprime (whether through foreclosures or to bond investors through securitizations) were minimal compared with losses of other subprime lenders after 2001.”

Allow me to translate: "Someone else got caught and lost more than we did so we're not to blame. Besides, we didn't do anything wrong anyway, remember?"

Unlawful lending has been widely investigated; no regulatory body has alleged Superior violated fair lending practices.”

That's clever - 'no regulatory body has...' that we know of, of course because of the terms of the settlement which bar any such investigation. But at least one court has. Check out the New York Supreme Court summary judgment ruling in favor of a borrower, noting that LaSalle had engaged in predatory lending. (LaSalle Bank N.A. v. Shearon Case (No.100255/2007, 2008 WL 268449).

Unlawful lending was not widely investigated in the Superior meltdown. It was hardly being investigated at all at that time. It was widely complained of, particularly in inner-city and minority communities but not much was actually being done. It was simply one tip of one iceberg the regulators were refusing to do anything about as the subprime heyday was ramping up and the money flowed into Washington.

In 2004, Penny Pritzker was named as a director of LaSalle Bank Corporation and federal regulators did not object to her serving on the board of a national bank.”

Wow. Penny got on board with another major Squaliforme (not long before it was purchased by BofA) and the lap-dog regulators didn’t object. We should all be more impressed, eh?

Granted, the authors of the alleged 'facts' about Superior Bank blog are simply doing their job on behalf of the Obama campaign, but until the people who want to be elected to office rid themselves of the wealthy sub-prime squaliforme friends and supporters, they deserve nothing but scorn and even more exposure.

As the title of my previous post says, "....More Need to Go."

The Honorable Judge Roy Bean

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