In the comments on my previous blog about Obama's muse and main backer Penny Pritzker, that "big stinking kahuna among the certifiable "Butt-Hole Surfers of Ameriican banking," a nasty commenter who knows just enough about banking to spell eff-dee-eye-see impugned my summary of the facts about the FDIC settlement with depositors in Penny Pritzker's failed Superior Bank.
Unfortunately, the annoying commenter was right and I was wrong.
The settlement negotiated between Pritzker and the FDIC was unimaginably worse than I had assumed it was, based on common sense extrapolation from reports in the New York Times and elsewhere.
I assumed that depositors (who lost more than the limit of federal bank insurance) would receive at least a dribble of the money recovered by legal action against the owners of Superior Bank and the giant accounting corporation that failed to detect so much sub-prime skullduggery before Pritzker and her friends had totally emptied the vaults.
I was so wrong, but it wasn't easy to figure out how wrong I was.
There wasn't enough substance in the few newspaper reports about this gigantic bank robbery to understand more about it than a vague outline. Courthouse reporters are usually among the first victims of newspaper downsizing, and general-assignment reporters can't even find the relevant federal court filings, much less understand those typically huge documents, and neither can I.
This would have been a dead-end except for the incredibly lucky circumstance that a professor of business law at Loyola in Chicago, Christian A. Johnson, wrote an full-tilt academic survey of the Pritzker-FDIC deal, which is available online here.
And so I learned yet another miserable truth about Barack Obama and his closest friends.
The FDIC sued the humongous accounting company Ernst & Young for the humongous sum of $2 billion, and promised to share $500 million of it with...
Guess who?
Was it the retirees who deposited their life-savings in Superior Bank, and lost everything beyond the $100,000 limit of FDIC insurance?
Was it the Superior Bank's creditors, who got stiffed when Superior Bank went bankrupt?
Or was it Penny Pritzker and her partners, the same mob that diddled away Superior's assets on worthless sub-prime repackaging while paying themselves $200 million in dividends on phony priofits?
Yes indeedy! The FDIC promised to pay Penny Pritzker and her pals $500 million out of their settlement with Ernst & Young!
"In the event that the FDIC recovered two billion dollars, the Pritzkers and the Dwormans would have been entitled to a payment of approximately $500 million under their settlement agreement with the FDIC."
Flush your depositors money down the sub-prime toilet, pay yourself quadruple what you paid for the bank in dividends on phony profits, and then...
Buy your way out of jail and collect $500 million!
Some elderly depositors with their life savings at Superior lost more than half their retirement nest-eggs in Penny Pritzker sub-prime wheeling and dealing, and how much did the FDIC offer them out of the Ernst & Young bonanza?
Nothing.
Unfortunately for the Pritzkers, the FDIC's suit against Ernst & Young was thrown out of court, along with the depositors' suit against the Pritzkers, and the final score is...
For the Pritzkers and their partners in sub-prime repackaging, the Dwormans:
$200 million in dividends, plus
$645 million in "cash, tax incentives and promissory notes" from the FDIC just for taking over Superior Bank in the first place...
Total benefits:
$845 million, minus
$42 million purchase price of Superior Bank and...
$460 million to be paid to the FDIC over 15 years.
Net profit for the Pritzkers and Dwormans for bankrupting Superior Bank:
$343 million!
$343 million net profit for diddling away all the deposits in the bank on worthless sub-prime repackaging while paying yourself $200 million in dividends on phony profits!
$343 million net profit for cheating elderly depositors out of half their life savings!
And that's without the $500 million that the FDIC promised to pay the Pritzkers and Dwormans if they won their suit against Ernst & Young!
Professor Johnson asks a very reasonable question about this beautiful deal with the owners of Superior Bank: "Did the FDIC act unjustly or unfairly to other depositors and creditors when it gave preferential treatment to its wealthy stockholders?"
You decide.
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