The consternation at the not-exactly-a-surprise nomination of billionaire Penny Pritzker to be Commerce Secretary, is sadly much less than is warranted. That suggests that the Forbes 400 member will survive her confirmation hearings. And in a telling bit of synchronicity, last week some fauxgressives set about amplifying an article in the Nation that big bank lobbying efforts were the reason Dodd Frank was amounting to very little. As we’ll discuss, both reflect how much Obama supports the interests of the FIRE sector (finance, insurance, and real estate). Dodd Frank is failing because it was designed to fail; the banks getting to have as much influence over it as they have is a feature, not a bug.
The basic facts of the Pritzker nomination haven’t improved since her name was first mooted in 2008, when she withdrew her name out of concern that she had too much baggage to win approval. Yet the tone of the latest New York Times story on her nomination sounds cautiously optimistic, even though if anything the facts are worse this time around.
In 2008, the Grey Lady ran an article that pointed out her many warts. Pritzker was the CEO of Superior Bank and put it into the subprime lending business. She continued to be on its board until it went bust in 2001 for alleged fraud and mismanagement. Pritzker’s allies lamely tried distancing her from the bank failure by saying she wasn’t running the bank at the time. Sorry, directors have a duty of care, and as a former CEO plus representative of its big backers, any board members who were concerned about the risks the bank was taking would have found it difficult to prevail against her views (particularly since board members were almost certainly selected for either their loyalty to the Pritzkers or their value as ornaments).
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Pritzker’s second wart was her family’s tax evasion. The Times in 2008:
Ms. Pritzker’s family is renowned for finding ways to avoid paying taxes on its wealth. The Pritzkers were pioneers in using tax loopholes to shelter their holdings from the Internal Revenue Service, and many of their dealings have never been made public.
A Daily Kos update in 2012 (hat tip Suzie Madrak):
But there is one thing all Pritzkers have, almost as part of their DNA: tax dodging. Since the patriarch A. N.
Pritzker set up that endless series of Bahamian trusts to dodge federal taxes back in the 1960s and 1970s, tax dodging (the “legal” kind that billionaires and millionaires can afford to do) has been a Pritzker family speciality, even when there are disagreements within the clan. Anyone who wants to read the SEC filings on behalf of the various Pritzker owners of the Hyatt Hotels can go numb reading each of those reports that dead ends in a Trust in Nassau.
Kos quotes a Crains’ Business report that reveals how horrifically unwilling the Penny Pritzker is to carry her own weight as a citizen:
According to documents from the Cook County assessor’s office, political fundraiser Penny Pritzker and her husband, Bryan Traubert, an ophthalmologist and civic leader, have repeatedly appealed the tax bill on their Lincoln Park mansion.
The couple have appealed 10 times since 2006. They’ve been successful twice and are waiting to hear on two other appeals. So far, they’ve saved close to $200,000 by successfully arguing that their place — a seven-bathroom, 8,400-square-foot home on three typical city lots — was assessed at too high a value when compared with similar properties.
The public documents about the tax matters were pulled together by a labor union battling the family’s Hyatt Hotels Corp.
The family isn’t commenting on the information. The union says the data are proof that the Pritzkers skirt the system at the expense of education and parks programs that benefit from property tax revenue.
And this effort to minimize taxes that support education takes us to the next set of warts: the Pritzker involvement in union-busting and Penny Pritzker’s personal involvement in weakening public education. As Greg Palast recounts, it was the anti-union efforts that led Pritzker to withdraw her name as a Commerce Secretary candidate in 2008:
But then, in November 2008, just as Obama was about to submit her nomination to Congress, a bunch of Pritzker’s victims marched on Washington. They were not from her busted bank, but unhappy workers from the lucrative nursing homes that her family owns through a string of complex offshore trusts. Obama slammed the door on Penny pronto.
The Pritzker family made its billions mostly from Hyatt Hotels and Hyatt nursing homes. Penny, on the Hyatt board of directors, is an infamously combative anti-union apostle.
But Pritzker was hardly deterred. Substance News (hat tip Erik Loomis) in 2012 detailed some of Pritzker’s more recent union sabotage efforts that the Times saw fit to overlook:
A “news” story in The New York Times discusses problems between Penny Pritzker and “labor” and leaves out the biggest confrontation of all between Penny Pritzker and unions in Chicago: her role as one of seven voting members of the Chicago Board of Education, appointed by Mayor Rahm Emanuel one year ago, or her ongoing role in the teacher bashing and union busting agenda of the former White House Chief of Staff that will come to a major confrontation in the next eight weeks. Yet that lengthy New York Times story manages to miss the elephant farting in the Times’s pup ten: Chicago Public Schools and the Pritzker agenda against real public schools, and on behalf of massive privatization, union busting, charter schools, and vastly expanded outsourcing, including in public education administration.
If you can read the coding, Pritzker is remarkably clear about the class agenda in play. A parent in the Chicago school system (hat tip Suzie Madrak) peels the onion:
Notice the notion that education as a vehicle merely to train workers is a significant degradation; even when the idea of educating women was seen as justified only as an exercise in enlightened motherhood, the repertoire of what was considered germane was much broader and would include the arts and disciplines that would foster critical thinking. Similarly, one of the reasons the French educational system was long considered a model was that it provided the same instruction across the country, with an eye of steering the best students, no matter how humble their backgrounds, to the grandes écoles. By contrast, in the Pritzker world, students are merely prospective multinational labor-fodder. Yet you see no mention of unions or questionable charter school tactics in the New York Times’ tally of her baggage. She presumably has to worry only about harassment from Republicans, and they approve of her posture on those issues.
Now the fact that Obama is heavily in the Pritzkers’ debt is no secret; Penny was Obama’s campaign finance chairman in 2008 (and make no mistake, Obama has considerably exaggerated the importance of small donors. He was and remains a machine candidate) and was co-chairman of his reelection campaign. But the roots go much, much deeper. If you haven’t read it already, I strongly urge you to read a speech by Robert Fitch to the Harlem Tenants’ Association one week after Obama’s 2008 win, in which he correctly foretold how Obama would behave towards big financial firms based on his long-standing role as a front for them. The important part is his description of the role that Obama played in the redevelopment of the near South Side of Chicago, and how he and other middle class blacks, including Valerie Jarrett and his wife Michelle, advanced at the expense of poor blacks by aligning themselves with what Fitch calls “friendly FIRE”: powerful real estate players like the Pritzkers and the Crown family, major banks, the University of Chicago, as well as non-profit community developers and real estate reverends.
Obama’s long-standing history as a bag carrier for big banking and real estate interests means articles like “How Wall Street Defanged Dodd-Frank” at the Nation that treat Dodd Frank as a serious effort at reform are fundamentally misleading. The article starts with an infographic where this text is what you hit first:
This implies that the lobbyists swarming over the bill to neutralize it was an inevitable part of the process where the public was outgunned by well-heeled interests. No, this is simply misleading and inaccurate framing. Who were the most powerful financial services regulators while Dodd Frank was being negotiated? Timothy Geithner and Ben Bernanke, both of whom were key actors in the runup to the crisis. Not only was no important regulator turfed out, Obama promoted Geithner for failure and renominated and whipped personally for Bernanke, who faced well-deserved opposition in the Senate. Dodd Frank was written in the absence of any proper post-mortem, and thus with a very incomplete understanding of the drivers of the crisis. The one facsimile of an investigation, the FCIC, was set up to fail, with a well-intended but weak chairman (Phil Angelides), unrealistic deadlines, and a cumbersome process for approving subpoenas that assured few would be issued.
And despite its much-commented-upon length, Dodd Frank was such a punt that it was actually not legislation in the conventional sense. Rather than put rules in place, it kicked virtually all matters over to rulemakings, or worse, studies. That automatically gave the banks another go at the question of what reforms, if any, would be put in place, while all agencies remained headed by the same sort of industry-friendly regulators that got us into the crisis. As Timothy Taylor of Conversable Economist wrote in 2012:
The Dodd-Frank legislation is almost not a law in the conventional meaning of the term, because it mostly isn’t about actual specific activities that are prohibited. Instead, it’s about handing over the difficult problems to regulators and telling them to fix it. I’m not sure there was an easy alternative to this regulatory approach: the idea of Congress trying to debate, say, appropriate regulation of the over-the-counter swaps market is not an encouraging thought. But stating a goal is not the same as solving a problem. The passage of Dodd-Frank, in and of itself, didn’t solve any problems.
In fact, if anything, Dodd Frank was designed to fail. Taylor cites Wayne Abernathy of the ABA. Remember, the ABA and its allies come out winners from this process. Yet even he finds this full employment act for his industry to be overwhelming:
At least in the financial regulatory history of the United States, there has never been anything like it. I have seen no definitive count of the number of regulations that the Dodd–Frank Act calls forth. The numbers seem to range between 250 and 400—numbers so large that they are numbing. It all defies hyperbole. The Fair and Accurate Credit Transactions Act, adopted in 2003, astonished the financial industry with more than a dozen significant new regulations to be written. …
“One of the most common criticisms of Dodd–Frank implementation has been a lack of order and coordination in the regulatory process. Instead, the Dodd–Frank Act has succeeded in replacing the financial crisis with a regulatory crisis. … As agencies are grappling with impossible rulemaking tasks, most of them are also engaged in major structural reorganizations and shifts in the areas of responsibility. … Nothing like this has ever been tried before in the history of the United States. Writing 400 financial regulations of the highest significance and the greatest complexity in a couple of years has clearly been too much to expect. … Getting on with the work to end our self-inflicted regulatory crisis should be among the highest priorities.
You need to wrap your mind around this. Dodd Frank is such a mess that it makes demands to throw it out seem reasonable. Rather than take the time to understand the drivers of the crisis and put a few key stakes in the ground, the effort to address the many symptoms means little will get done and even less will be done well. And with so much effort invested, there’s no will to go back to the drawing board. Bills like Brown-Vitter, which give a clear set of laws that would force too big to fail banks to downsize, are an admission that Dodd Frank has failed. Despite all the enthusiasm from the remaining bank reformists, Brown-Vitter, which is a short and clear statement of how to make being too big to fail so unattractive as to force behemoth firms to downsize, has all the earmarks of a non-starter. Bank lobbyists aren’t terribly exercised about it because key actors like Carl Levin and the Treasury Department aren’t supporting it. As Richard Smith remarked, “Brown-Vitter is OK as a stick to beat Basel III with, and a good sign of the underlying tensions and disillusionment with global bank regulation, but that’s about it.”
So as always, the idea that Obama or the Democrats are somehow victims of those scheming bank lobbyists is simply a convenient fiction. We are winding up with a lot of motion and a lot of insiders getting enriched with pretty much nothing in the way of progress. And never forget that was the real plan from the get-go. With Obama, that’s the only sort of change you can believe in.
Write your senators to reject Obama’s terrible nominees for Commerce, the FCC and Trade Rep.