The Wall Street Journal reports:
Federal officials heap much of the blame for the subprime mortgage mess on lenders, claiming they recklessly made too many high-cost home loans to borrowers who couldn't afford them.
It turns out that the U.S. government itself was one of the lenders giving out high-interest, subprime mortgages, some of them predatory, according to government documents filed in federal court.
The unusual situation, which is still bedeviling bank regulators, stems from the 2001 seizure by federal officials of Superior Bank FSB, then a national subprime lender based in Hinsdale, Ill.
Here's more on troubled Superior Bank owned by the
Pritzker family from the Office of Thrift Supervision on July 27, 2001:
The Office of Thrift Supervision (OTS) closed Superior Bank FSB, Hinsdale, Ill., today and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.
The FDIC transferred the insured deposits and substantially all the assets of Superior Bank into a newly chartered, full-service mutual savings bank, known as Superior Federal, FSB, which will open for business on Monday morning. All depositors of Superior Bank automatically become depositors of Superior Federal, and will have immediate access to their insured funds. All 18 of Superior Bank's Chicago metropolitan area offices will open for business Monday and will continue to offer full banking services, including online banking. Superior Bank's loan production and servicing operations will also continue to operate normally.
OTS used its authority under the FDIC Improvement Act of 1991 to close Superior Bank when it found that the bank remained critically undercapitalized � that its tangible equity capital was less than two percent of its total assets. The bank failed to implement a capital restoration plan that it submitted to OTS on May 24 this year.
Superior Bank suffered as a result of its former high-risk business strategy, which was focused on the generation of significant volumes of subprime mortgage and automobile loans for securitization and sale in the secondary market. OTS found that the bank also suffered from poor lending practices, improper record keeping and accounting, and ineffective board and management supervision.
Superior became critically undercapitalized largely due to incorrect accounting treatment and aggressive assumptions for valuing residual assets. The bank also experienced significant losses during 2000 from its automobile lending program.
OTS has determined that Superior Bank is insolvent, having incurred losses that have depleted all or substantially all of its capital. OTS also determined that Superior Bank was no longer able to transact business in a safe and sound manner.
OTS notified the bank of its serious concerns in July 2000.
The bank was purchased by two families in 1988 � the Pritzker family of Chicago, owner of Hyatt Hotels and other interests, and the Dworman family of New York, with interests in real estate and financial services activities � and was operated through a complex network of holding companies.
Even more on
Penny Pritzker of Obama's national campaign.Here's the
The New York Times December 11, 2001:
The Pritzkers, who have a long and troubled history in the S.& L. business and who once battled the Internal Revenue Service over estate taxes, said they hoped the agreement would also prevent their reputation from being further tarnished by a government investigation into the failure of Superior. Regulators said Superior had collapsed because of poor lending practices and sloppy bookkeeping.
Federal regulators were also embarrassed by the swift fall of Superior last summer and were criticized by lawmakers and industry experts for failing to see signs of trouble at the institution, which had assets of $2 billion when it failed. The settlement with the Pritzkers allows the Federal Deposit Insurance Corporation and the Office of Thrift Supervision to claim a small victory in the debacle.
''Never before has the F.D.I.C. achieved an agreement of this size in regard to a single institution -- and to achieve such an agreement in five months is equally unprecedented,'' said Donald E. Powell, chairman of the agency, in a statement.
For the Pritzkers ties to the
Chicago Mob check out Gus Russo's book on Sidney Korshak.
