Senator Asks for Probe of Superior

The chairman of the Senate Banking Committee has asked federal agency watchdogs and congressional investigators to examine events surrounding the failure of Superior Bank, which is expected to cost the deposit insurance fund some $500 million.

Sen. Paul Sarbanes (D-Md.) said the collapse of the Chicago-area thrift raises concerns about its high-rate mortgage and auto loans to borrowers with tarnished credit and the reliability of its accounting methods.

Superior, owned 50-50 by the multibillionaire Pritzker family and New York developer Alvin Dworman, was closed July 27 by federal regulators, who determined it had engaged in poor lending practices, inadequate supervision of employees and poor record keeping. The thrift, with some $2.3 billion in assets, has been operating since Monday under control of the Federal Deposit Insurance Corp. as Superior Federal FSB.

In a letter Wednesday to the inspector general of the FDIC, which insures accounts up to $100,000, Sarbanes said, “Given the role of the FDIC in promoting and preserving public confidence in our financial depository institutions, I request that you review why the failure of Superior Bank resulted in such a significant loss to the deposit insurance fund and make recommendations for preventing any such loss in the future.”

Sarbanes also wants the General Accounting Office, Congress’ investigative arm, to examine the Superior case as well as other banks and thrifts with similar problems and to determine how well the regulators’ oversight is working.

He also sent a request to Treasury Department Inspector General Jeffrey Rush Jr., whose office is looking into the Superior failure under a rule requiring that inquiry whenever the federal insurance fund loses $25 million or more, to provide the report to Congress.

The inspectors general are independent of the federal agencies they monitor.