Federal regulators close U.S. bank
Federal regulators closed a Chicago-area bank half-owned by the multi-billionaire Pritzker family that has been battered by huge losses on loans to high-risk borrowers.
The failure of Superior Bank is expected to cost the federal insurance fund an estimated $500m (stg£351m), according to banking experts who have reviewed its operations, which would make it one of the costliest failures of a US financial institution.
The Pritzkers, who control the Hyatt hotel chain and have other real-estate and industrial holdings, are one of the nation’s wealthiest families and have been major contributors to the Democratic Party.
The federally insured thrift was closed yesterday and the Federal Deposit Insurance Corporation was appointed as receiver.
It will open for business on Monday morning as Superior Federal FSB, a full-service savings bank under a new charter, the federal Office of Thrift Supervision said.
The agency said all depositors ‘‘will have immediate access to their insured funds’’ at all 18 of Superior’s offices in the Chicago metropolitan area and loan operations will continue normally.
A thrift, also known as a savings and loan, is a limited type of bank, which typically serves a local community. It deals in smaller transactions than large banks, and often its clients may be lower income, and bigger credit risks, than bank clients.
The regulators found that Superior, based in Chicago suburb of Oakbrook Terrace, Illinois, had lost nearly all its assets and had engaged in poor lending practices, inadequate supervision of employees and poor record keeping.
It was only the fourth financial institution closed by the federal thrift agency in the past five years.
America’s thrifts became financially stronger after the savings and loan crisis of the late 1980s and early 1990s, which led to a massive government bail-out.
Forbes magazine last year said that Robert Alan Pritzker and Thomas J. Pritzker were each worth $5.5bn (stg£3.86bn) and tied for 41st on the list of richest Americans.
The family has contributed tens of thousands of dollars annually to Democratic Party candidates.
However, Handelsman said, the Pritzkers were passive investors who had little control over the management of the thrift, and therefore were ‘‘not willing to pour money down a black hole of uncertain numbers and unknown losses which appears to be the case.’’
The Pritzkers’ 50-50 partner in the thrift and its holding company, Coast-to-Coast Financial Corp., is New York developer Alvin Dworman.
Superior specializes in making high-interest mortgage, auto and other loans to consumers with troubled credit histories who cannot qualify for better rates.
Those borrowers often run into financial trouble in a slumping economy and may be unable to repay the loans, bringing losses for the bank or thrift.
Some community groups have criticised Superior for its lending practices, which they said targeted minorities and the poor in ads on daytime television.
Superior, with some $2.1bn(stg£1.48bn) in assets, has struggled for more than 18 months and thrift agency examiners expressed concern in February about its solvency as the result of mounting loan losses and other problems.
The thrift lost $22m (stg£15.4m) in the fourth quarter of last year.
In February, according to banking industry publications, Superior sold off $400m (stg£281m) in loans a day after the credit-rating agency Fitch lowered its rating on the thrift’s long-term debt to below investment grade.
