Making official what many Democrats have expected for weeks, President Obama has nominated Chicago business executive Penny Pritzker, a longtime political supporter and heavyweight fundraiser, as his new Commerce secretary this morning.
Pritzker’s nomination could prove controversial. She is on the board of Chicago-based Hyatt Hotels Corp., which was founded by her wealthy family and has had rocky relations with labor unions, and she could face questions about the failure of a bank partly owned by her family.
With a personal fortune estimated at $1.85 billion, Pritzker is listed by Forbes magazine among the 300 wealthiest Americans.
If the nomination is confirmed by the Senate, Pritzker would become the first member of her influential family to hold a top-level political office, creating an opportunity to make a name for herself apart from the roles she has played within the family’s many businesses, which in recent years were divested.
At its peak the Pritzker empire included a bank, a credit reporting agency, an industrial conglomerate, residential developments from coast to coast and the Hyatt Hotel chain, founded by her uncle Jay, among other investments.
Penny Pritzker runs PSP Capital Partners, an investment firm, and its affiliated real estate investment firm, Pritzker Realty Group. She played an influential role in Obama’s rise from Illinois state senator to the nation’s 44th president, serving as Obama’s national finance chair in his first campaign for the White House and co-chair of his reelection campaign.
The president is expected to make the announcement at 10 a.m. at the White House.
As Commerce secretary, Pritzker would take charge of the administration’s efforts to build relations with business leaders who were often on the sharp end of the president’s first-term rhetoric.
The White House conducted an in-depth review of Pritzker’s background in preparation for the confirmation hearings. A senior administration official who asked not to be identified in order to talk about internal White House discussions said the administration concluded Pritzker was “definitely confirmable.”
The president’s vetting attorneys went carefully through her lengthy list of investments and assets, noting what the official called her “rigorous and diligent and thorough” participation in the process. Pritzker, however, could draw fire from labor leaders. Hyatt has long battled Unite Here in Los Angeles, Chicago and elsewhere. And Pritzker, who served on the Chicago Board of Education until she resigned in March, has been harshly criticized by the Chicago Teachers Union. When she stepped down, a union official said she “has a long and storied history as an anti-labor and anti-worker kind of boss.”
She could also face scrutiny over the collapse of Superior Bank, which was co-owned by her family. The bank, based in Hinsdale, Ill., was involved in subprime mortgage lending, and its failure in 2001 stirred charges of fraud and mismanagement.
Four years ago, Pritzker withdrew her name from consideration for the Commerce job, citing family obligations. At that time, the peak of the financial crisis, Pritzker was managing a large portion of the family’s billions of dollars in assets.
Her success in business is one of the reasons Obama wanted her in his cabinet, aides said. She is the second CEO to be named to the cabinet in his second term. Obama recently nominated Sally Jewell, CEO of the outdoor recreation company REI, to serve as his Interior secretary. Pritzker has been one of Obama’s most valuable fundraisers, raising more than $500,000 for his reelection. Earlier this year, she donated $250,000 to his inaugural committee.
Advisors to the president say Obama has wanted to name Pritzker for months now, citing her work in building five different companies and her service on the president’s Council on Jobs and Competitiveness and on the Economic Recovery Advisory Board.
Outside of business circles, the Pritzker family is mainly known for its philanthropic contributions and activities, such as the Pritzker Architecture Prize, the Pritzker Pavilion at Millennium Park and the Pritzker School of Medicine at the University of Chicago.
But despite its wealth and influence, the family has not had a recognized tradition of political leadership or public service. Of the 13 grandchildren of family patriarch, A.N. Pritzker, only Penny and her brother J.B., who also lives in Chicago, have been prominently involved in national politics, an interest they inherited from their late mother.
On several occasions, the Pritzker family has been at odds with the federal government — over the bank failure and an issue of questionable tax-reduction tactics. However, her personal network, business credentials and family name have served Obama well, both financially and politically.
After overseeing a recording-breaking fundraising effort in 2008 as Obama’s national finance chair, she served on two White House councils focused on the economy and became a conduit for business executives to voice their frustrations with the President.
For instance, as soon as financial reform legislation cleared Congress, the President set out to repair relationships with business leaders who felt stung by his criticism of Wall Street’s “fat-cat bankers.” In Chicago, Pritzker convened a group of executives to meet with Obama while he was in town attending Democratic fundraisers. The President even took notes.
“She wanted to make sure he was hearing strong points of view,” Byron Trott, founder of Chicago-based BDT Capital Partners and a Republican, told the Tribune in February. Trott, who attended the meeting with the president later added, “She knows the president, and she’s willing to be firm with the president.”
While her decade-long relationship with the President will give her instant credibility with corporate and foreign leaders, she has few to no allies within organized labor. Hyatt Hotels, on whose board she sits, remains in a four-year labor dispute with its primary union in Chicago, UNITE HERE Local One, over contract provisions.
The fight has grown intensely personal. The union and its allies have confronted Hyatt board members at their workplaces; reproached Pritzker-backed charities; and produced a movie about a then-Pritzker family-owned subsidiary’s decision to shut down an East Chicago manufacturing facility and accept millions in tax incentives to move jobs to Louisiana.
Since Pritzker’s name surfaced for the Commerce Secretary post, Local One’s President Henry Tamarin has been silent on the pick and declined interview requests with The Tribune. His son, Nate Tamarin, works at the White House and is a liaison to labor.
The Chicago Teachers Union, meanwhile, has not been muzzled. Pritzker stepped down from the Chicago Board of Education in March days before Mayor Rahm Emanuel announced he had targeted 53 elementary schools and a high school program to close, affecting an estimated 30,000 students. By stepping down, Pritzker avoided having to cast a politically unpopular vote and endure further protests as the White House considered her for the Commerce Secretary post.
“We know Penny Pritzker has a long and storied history as an anti-labor and anti-worker kind of boss,” Kristine Mayle, financial secretary of the Chicago Teachers Union, told the Tribune in March. “Her policies adversely affect working families. She has worked to close schools and destabilize neighborhoods, and we hope she does a better job in her new position, if she gets it.”
Also trailing her during confirmation hearings will be the 2001 failure of Superior Bank, then the nation’s largest bank failure in a decade, where Pritzker was chairman from 1991 to 1994. Pritzker also was assigned to deal with the matter after her uncle Jay died in 1999. The bank was co-owned by the Pritzker family and New York developer Alvin Dworman — and aggressively pursued subprime mortgages and car loans.
Superior Bank’s failure arguably has become more relevant as time has passed. The bank gave loans to people who couldn’t afford to repay them and then sold portions of them off to investors — a strategy similar to one that contribute to the near-collapse of the nation’s economy less than a decade later.
If Pritzker becomes Commerce secretary, it remains to be seen how she will adapt to the heightened scrutiny that comes with a cabinet post and whether she can rebuild an agency that has been without a permanent leader since John Bryson resigned in June 2012 for medical reasons. The New York Times reported that month that the department had a $7.5 billion budget and 47,000 employees worldwide.
Pritzker, at least, is accustomed to numbers that large.