Blame Exchanged Over Superior Bank

U.S. bank regulators Tuesday blamed the wealthy owners of Chicago’s Superior Bank for its costly recent failure, whereas a banking analyst said the supervisors themselves should shoulder much of the blame.

The comments came in testimony prepared for, but not delivered to, a Senate Banking Committee hearing. The hearing was suspended as congressional office buildings were evacuated in the aftermath of the day’s terror attacks.

The $1.9-billion-asset Superior Bank--staggering under big losses from lending to high-risk borrowers and alleged improper accounting for loans it bundled and sold to investors--was seized by regulators in July. The failure could end up draining $500 million to $1 billion, by some estimates, from federal deposit insurance funds--making it one of the costliest in recent history.

It has also sparked finger-pointing between the bank’s owners--Chicago’s Pritzker family, owners of Hyatt Hotels, and the Dworman family, prominent New York real estate developers--and among bank regulators in Washington.

The Banking Committee had been expected to focus much of its attention on how the case was handled by the Office of Thrift Supervision, which oversaw Superior, and the Federal Deposit Insurance Corp., which is now running it until it can be sold and which will absorb the losses from the failure.

The two regulators have been at odds over the issue, with suggestions that a lack of interagency cooperation was a factor in the collapse.

“Were there occasional disagreements in judgment between the OTS and FDIC about the handling of Superior? Yes. Did this cause Superior to fail? No,” OTS Director Ellen Seidman said in her prepared testimony.

“I sincerely believe that this failure was the responsibility of those who owned and managed the institution and related parties,” she said.

After the scale of the bank’s problems became apparent, the OTS and Superior’s owners put together a recapitalization plan that would have injected $270 million back into its coffers, Seidman said. The plan collapsed, and the bank was seized, when the Pritzkers withdrew their support, she said.