Chicago billionaire Penny Pritzker sailed toward confirmation as U.S. Commerce secretary after satisfying some critics over her offshore investments and role in a bank’s collapse during testimony at a Senate committee.
Senator John Thune of South Dakota, the top Republican on the Commerce Committee that considered the nomination, said today Pritzker probably will be confirmed after a recess for U.S. Memorial Day next week.
“She acquitted herself really well here,” Thune told reporters, adding that he won’t announce how he’ll vote until later. “I can’t see that there’s anything that would keep her from getting through the process in pretty good shape.”
Republicans had said Pritzker, 54, a top Democratic donor who helped lead President Barack Obama to record fundraising as the finance chairman of his 2008 campaign, should answer questions about the bank and her accounts. Instead, lawmakers today focused on operations -- from weather forecasting to trade promotion and airwaves management -- and how her business experience would be an asset for the department with almost 43,000 employees.
Yesterday, some Republicans of the committee -- including Ron Johnson of Wisconsin and Dan Coats of Indiana -- said Pritzker, whose family founded Hyatt Hotels Corp (H)., made a positive impression in one-on-one meetings in recent days.
Pritzker, whose family founded Hyatt Hotels Corp (H)., would be among the wealthiest U.S. cabinet secretaries in history. In a disclosure form last week, she reported assets of $400 million to $2.2 billion, excluding the value of more than $50 million in Hyatt Hotels stock. The Bloomberg Billionaires Index puts her net worth at more than $1.5 billion.
Pritzker was asked only once about her role in the 2001 collapse of suburban Chicago’s Superior Bank, a pioneer in securitizing subprime mortgages and an institution half owned by her family where she was board chairman from 1991 to 1994.
Federal regulators took over the bank and the co-owners, including the Pritzker family, agreed to pay the government $460 million, according to the Federal Deposit Insurance Corp. and the Office of Thrift Supervision. It was the biggest U.S. bank failure in a decade.
Pritzker said her family offered to pay those funds to depositors, telling senators that “it was the right thing for us to do, because both for the depositors and for us as a family.” Asked about some uninsured depositors who nevertheless lost substantial savings, she said she regrets the failure and learned from the experience.
“I feel very badly about that,” she said. “The lessons that I’ve learned are really about good management, good governance structure, the importance of diversification in risk management, transparency and having a solid governance.”
On her investments, Pritzker told senators she intends to change administration of offshore trusts benefiting her and her family to the U.S. In her filing last week, Pritzker said she received $53.6 million in consulting-fee income last year from offshore trusts in the Bahamas, administered by CIBC Trust Co.
This week, Pritzker amended her disclosure filing to show $86.5 million in additional income as a consultant on hundreds of U.S.-based trusts, including family accounts. Her spokeswoman, Susan Anderson, said it was inadvertently omitted from the initial filing.
Republican senators, including Thune and Charles Grassley of Iowa, have said her nomination is a hypocritical move by Obama after he last year charged Republican presidential nominee Mitt Romney with dodging taxes by stashing money overseas.
“I have asked the trustee to remove themselves and appoint a U.S. trustee,” Pritzker said, adding that the trusts were established when she was a child and she doesn’t control or direct them.
Pritzker spent most of the two-hour hearing answering questions about her ideas for managing the agency’s far-flung programs. Republicans and Democrats praised her business experience and willingness to leave the executive suite to come to Washington for a job that will pay $199,700 a year.
“I think it’s pretty obvious that you’re not coming to this job for a paycheck,” said Senator Claire McCaskill, a Missouri Democrat.
She said she supported Obama’s proposal to consolidate some agencies, including the Commerce Department, U.S. Trade Representative and the Export-Import Bank. The proposal so far has not gained support on Capitol Hill.
Pritzker said her interest in business began when she was a child and evolved into a career spanning real estate, financial services, senior housing and philanthropy. She vowed to be an integral part Obama’s economic team and boost U.S. manufacturing and exports.
“I believe very strongly that we must ensure that American entrepreneurs can continue to pursue and achieve their dreams, as my family has had the opportunity to do over the past century,” Pritzker said.
The hearing lacked any outbursts or disruptions. Even some of her toughest opponents in the hearing room -- about 40 members of the labor union UNITE HERE -- remained quiet.
The labor union is fighting Hyatt over pay issues and what it says is a practice of outsourcing jobs, and it held a protest in Chicago against her nomination earlier this week.
Pritzker reported $176.2 million in income last year, her financial disclosure forms show. The figure includes $118.7 million for over a decade’s worth of consulting on the restructuring of her family’s U.S. trusts and $53.6 million for similar work on accounts based in the Bahamas.
Pritzker said that if confirmed she would divest 221 separate financial holdings and resign from 158 entities -- including her seat on the Hyatt board.
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