Obama’s early Chicago rise brought African-Americans foreclosures, bankruptcies
President Barack Obama wants his 2012 re-election campaign to focus on Gov. Mitt Romney’s private-sector record, but his own private-sector history shows that he promoted and profited from the nation’s disastrous real-estate bubble.
One striking example comes from the president’s 1995 housing-discrimination class action lawsuit: It provided him with legal fees, greased his political donations and boosted his role in Chicago politics.
While he made personal gains, his lead African-American client, Selma Buycks-Roberson, declared bankruptcy in 2001 — and again in 2008 as she received a home foreclosure notice, according to unpublicized federal and city records obtained by The Daily Caller.
Buycks-Roberson is still likely underwater on her mortgage, owing more to her home lender than the property is worth. Her house has dropped in value by 30 percent since 2010. Its 2011 assessed value for tax purposes was $97,520, well below her 2006 mortgage of $112,400. Meanwhile, the online real estate database Zillow estimates that home is worth just $69,400 today.
Buycks-Roberson’s story is not an anomaly. It can be found repeatedly throughout Obama’s Chicago. (RELATED: Full coverage of President Obama’s roots in Chicago politics)
By 2012, the average home equity in Chicago’s African-American neighborhoods had shriveled to $6,800, according to a March report from the Woodstock Institute, a liberal Chicago housing advocacy group. The average equity in homes in the city’s white neighborhoods is $108,000.
Fully 44 percent of homes in Chicago are underwater, compared to a national average of 31 percent, according to a Zillow-generated map.
The zip code located five blocks south of Obama’s house at 5046 S. Greenwood Avenue has an underwater-mortgage rate of 56 percent, slightly above Detroit’s famously depressed 55 percent rate. Zillow’s map shows that the wealthier neighborhood just four blocks north of Obama’s home has an even more stunning rate of underwater mortgages — 72 percent – one percentage point above that of worst-in-the-nation Las Vegas.
In Buycks-Roberson’s inland neighborhood, 57 percent of homes are underwater.
Reporters have aggressively sought more information from Romney about his business record, but there is no sign that a single reporter has ever asked Obama about his role in Chicago’s housing disaster.
The closest Obama has ever come to admitting his role in the scandal came in a September 2007 speech to a Wall Street audience.
“Subprime lending started off as a good idea: helping Americans buy homes who couldn’t previously afford to,” he said. (RELATED: Daily Caller coverage of home mortgages and foreclosures)
But “as certain lenders and brokers began to see how much money could be made,” he said, “they began to lower their standards. … Most everyone knew that some of these deals were just too good to be true, but all that money flowing in made it tempting to look the other way and ignore the unscrupulous practice of some bad actors.”
“Turning a blind eye to the cronyism in our midst can put us all in jeopardy … and we cannot accept that in the United States of America.”
Obama the lawyer
The lawsuit had its beginning in 1994 when Fay Clayton, a progressive, Democratic-aligned lawyer, claimed that Citibank Federal Savings had discriminated against Chicago resident Selma Buycks-Roberson.
In 1995, Clayton merged her legal action with a second lawsuit filed by another progressive lawyer, Judson Miner, a founding partner in the firm now known as Miner, Barnhill & Gallard.
Obama had joined Miner’s firm in 1993 because it pursued civil-rights litigation and represented progressive non-profit political groups, Miner told The Daily Caller.
“We combined two things he was interested in,” said Miner, a former chief of staff for Harold Washington, Chicago’s first African-American mayor.
Obama volunteered to work on the Buycks-Roberson lawsuit, and was named in a court docket as Miner’s lead lawyer for Buycks-Roberson and two other plaintiffs. “We all represented all of them,” Clayton told TheDC, when asked if Obama deserved credit for the case’s settlement.
Obama volunteered for several other political lawsuits, including three filed on behalf of the controversial ACORN community organizing group. He also defended landlords from tenants in two cases, according to a 2008 article in the Los Angeles Times. Obama was elected in 1996 to the part-time job of state senator, but stayed at the firm until 2004, Miner said. The firm paid him by the hour or compensated him according to a set fee schedule.
Outside the firm, Obama was also building connections with the city’s elites through other activities, including his teaching position at the University of Chicago, his membership in Rev. Jeremiah Wright’s Trinity United Church of Christ and his role with several philanthropies, including a seat on the board of the far-left Joyce Foundation.
Chicago’s housing lobby
The Buycks-Roberson lawsuit was just one small part of a national campaign by progressives to force banks to increase their lending in poor African-Americans neighborhoods. Chicago was an early battleground in that campaign because it had an influential community of progressive lawyers, community organizers, developers and politicians working on housing issues.
This community had emerged from the urban wreckage caused by 1970s federal housing regulations, which rewarded real-estate “blockbusting” practices that encouraged white, affluent homeowners to sell their properties at a loss after poor people of color bought homes in middle-class neighborhoods.
Whenever poor buyers defaulted, average home prices declined — spurring additional purchases by low-income buyers.
Chicago activists believed more federal regulation would cure the blockbusting problem by boosting lending to African-Americans within so-called “redlines” drawn — often literally – on maps around poor African-American neighborhoods. A redlined city district was one where banks had made a categorical decision not to invest.
Activists’ anti-redlining campaigns persuaded the Democratic-dominated Congress to pass the Community Reinvestment Act in 1977, and to tighten its enforcement in 1995. They also persuaded President Bill Clinton to establish an anti-redlining policy in 1994, essentially creating a set of lower standards banks could apply when deciding whether to lend money in poor areas.
“Applying different lending standards or offering different levels of assistance to applicants who are members of a protected class [such as African-Americans] is permissible in some circumstances,” said a landmark April 1994 policy, signed by 10 top banking and real-estate regulators. And “providing different treatment to applicants to address past discrimination would be permissible if done in response to a court order.”
The signatories included Housing secretary Henry Cisneros and his deputy, Aida Alvarez, Attorney General Janet Reno, Comptroller of the Currency Eugene Ludwig and the Federal Reserve Chairman Alan Greenspan.
Those legal changes made banks vulnerable to civil-rights lawsuits whenever lawyers could show banks had seemingly declined to offer mortgages to African-Americans, even in depressed neighborhoods.
Throughout the 1990s, Citibank was hit by 11 civil-rights housing lawsuits, including five in New York and five in Chicago, according to the Public Access to Court Electronic Records (PACER) database of federal court documents.
Worse, regulators could effectively disable or dismantle any bank accused of violating the anti-redlining policy.
In a post-deregulation era, banks found it necessary to compete for new customers, buy smaller banks and launch new businesses. Citibank was a corporate customer to New York’s expanding investment banks, and in 1995 it lost its No. 1 rank when Chase Manhattan and Chemical Bank announced a massive merger.
Banks desperately needed regulators’ approval for their growth plans, so they had to cooperate with progressive activists and their attorneys. They increased their anti-redlining loans by 39 percent between 1993 and 1998, according to a 2000 Treasury Department report. Other mortgage lending grew by only 17 percent.
Citibank also decided to cooperate: In February 1998 it settled the Buycks-Roberson lawsuit for $1.37 million.
By October, after Citibank had promised $115 billion for anti-redlining loans, regulators approved its merger with Travelers, turning it into Citigroup, the world’s largest bank.
The Buycks-Roberson settlement was a jackpot for Obama and his political allies.
“When you follow the civil-rights law, it makes the pie bigger for everyone,” Clayton told TheDC.
The deal provided $360,000 to a few hundred African-American plaintiffs who got payouts ranging from $770 to $3,250 each, plus a promise of Citigroup’s help when seeking new mortgages. Buycks-Roberson and two other lead plaintiffs got an extra $20,000 each.
The law firms split $950,000.
Obama worked 138 hours on the case and billed a fee of $23,000, at $166.67 per hour, according to a December 2007 Chicago Sun-Times article. His salary as a part-time senator was roughly $60,000 in 1998.
From 1995 to 1997, he had received $3,250 from colleagues at Miner’s law office. In 1999 and 2000, he took in another $12,300 from his colleagues for his successful state race and his unsuccessful race for a federal House seat.
By Chicago campaign standards, that was a lot of cash. In his two 2000 state reports, Obama claimed $2,150 and $0 in donations from individuals. In total, he raised $471,932 for his three state races, mostly from unions, trade associations and companies.
By the time of Obama’s 2004 U.S. Senate race, Miner and his wife had donated roughly $22,000 to Obama, according to online campaign finance records. For that federal race, the firm’s other lawyers added $21,000, and Clayton contributed $1,500. Clayton also hosted a December 3, 2003 fundraiser for Obama. He received $17,500 from 20 Chicago donors that day, according to Federal Election Commission reports.
Obama’s work on the Buycks-Roberson lawsuit also helped win him influential friends in the housing sector.
“We got to know the fair-housing groups … [and Obama] developed some respect among the people who believe in housing and civil rights,” Clayton said. “That’s why he joined [Miner’s] firm, from what I understand.”
Obama was invited to give an agenda-setting speech at a 1996 meeting of city officials and progressive housing activists. The 1996 Futures Forum “really brought together all of the key stakeholders across the city,” said Joel Bookman, director of programs for a critical foundation-funded group, Local Initiatives Support Corporation (LISC) Chicago.
Obama was invited to speak because people were saying he “is really bright, he’s really thoughtful, [and] he’s done some work as an attorney in these communities,” Bookman told TheDC.
The housing groups helped Obama when he ran for state office in 1998, for a U.S. Senate seat in 2004, and for the White House in 2008. Toni Foulkes, a Chicago alderman and a national board member of ACORN, summed it up in a 2004 article he wrote for the journal Social Policy.
“By the time he ran for U.S. Senate,” Foulkes wrote, “we were old friends.”
Obama also made friends among the city’s developers, including Tony Rezko — who was convicted on corruption charges in 2008 — and in the city’s urban planning division, then overseen by Valerie Jarrett, who remains one of his closest political advisers. Real estate interests contributed heavily to his 2004 campaign, including $12,000 from Penny Priztker.
Obama won friends in the banking sector too.
Facing the progressives’ anti-redlining regulations, banks did what successful businesses do: They found a new way to profit, outsourcing the higher-risk loans and earning fees by playing the role of middle-man.
The banks recruited others to do the shady work of selling complex mortgages to under-educated poor Chiagoans. Bank-funded neighborhood agents, local lenders, ambitious community leaders and upstart mortgage-companies — such as Countrywide and Ameriquest — profited from the new “subprime” market by offering primary mortgages and refinancing loans, usually with high interest rates and extra up-front fees, almost regardless of borrowers’ ability to pay.
The banks took a share of those profits, and then made still more money by selling the subprime loans demanded by Democratic appointees who ran the taxpayer-backed Fannie Mae corporation.
With profits in hand, the banks then counted their subprime mortgages to meet the anti-redlining quotas set by federal regulators.
The results for major banks were comparatively clean hands, minimal risk, tremendous profits and considerable applause from regulators and progressive politicians.
Between 1998 and 2007 Citigroup doubled its stock-market value to $900 billion. In turn, Citigroup executives shared their earnings with their government partners.
In 2007 and 2008, Citigroup gave Obama $736,771 for his presidential race, according to data collected by the Center for Responsive Politics.
Obama got $126,349 from the two huge taxpayer-backed mortgage traders, Fannie Mae and Freddie Mac, between 1989 and 2004. Only Democratic Connecticut Sen. Chris Dodd, who chaired the powerful Senate banking committee, got more cash from the two subprime lending giants.
Once in the Senate himself, Obama joined with Dodd to block a 2005 bill that would have curbed Fannie Mae’s funding of the high-risk mortgage bubble. By 2005, nearly 20 percent of new U.S. mortgages were subprime loans. (RELATED: Daily Caller coverage of crony capitalism in government)
The banks also spread the money around to progressives in Chicago and other Democratic-run cities.
In addition to the $115 billion in anti-redlining loan investment it promised in order to win regulators’ approval for its 1998 Travelers merger, Citigroup offered at least one more incentive to progressives. The mega-bank announced in August 1999 that it had picked one of Bookman’s LISC Chicago executives to distribute $6 billion in loans and aid to housing organizations and community groups.
The new chief, Andrew Ditton, had worked at LISC Chicago for 13 years and ran his own Chicago-based operation in 1997 and 1998. And he was well known to Citigroup.
The company directly “provided $900 million in investments, loans and grants to LISC over the past 20 years,” according to a May 2010 video appearing on one Citigroup website.
Some money went to Jesse Jackson, who held the first meeting of his Chicago-based Wall Street Project in January 1998. The event included speeches by President Clinton, Alan Greenspan, Securities and Exchange Commission Chairman Arthur Levitt and Treasury Secretary Robert Rubin.
Citigroup’s partnership with Washington progressives was illustrated in 1999 when Rubin left the Clinton administration to join the boards of both LISC and Citigroup as “director and senior counselor.” During his stay at Citigroup, Rubin extracted $126 million in cash and stock from the bank’s shareholders. In late 2007, he briefly ran the bank as it was losing 90 percent of its shareholders’ wealth.
Payouts require pay-ins. In Obama’s Chicago, working-class African-Americans are doing a lot of the paying.
Under the 1998 Buycks-Roberson settlement, Citibank promised to establish a two-year program to boost mortgage lending to poor African-Americans.
“They held their end of the bargain,” said Renee Brooks, a certified public accountant and one of the two named plaintiffs in the case other than Buycks-Roberson. “They financed my mortgage and everything that was promised from the lawsuit they did,” she told TheDC.
In fact, she added, “the pendulum swung the other way” as the banks began providing loans on too-easy terms.
In 1999, minorities got “9% of all of Citigroup’s 1999 mortgage-related lending,” according to Citigroup’s post-merger report, “Diversity at Citigroup.” In 1998, the report noted, “all bank and bank affiliated lenders disbursed 4% of their total mortgage lending to these borrowers.”
The report also said Citigroup boosted mortgages to Hispanics from 3,000 in 1997 to nearly 24,000 in 1999.
Many of these low-income mortgages went bad very quickly.
“In the Chicago area, foreclosure starts rose 238 percent from 1995 to 2002 … [and] neighborhoods with 90 per cent or greater minority populations experienced an increase of 544 percent,” according to housing experts Dan Immergluck and Geoff Smith, writing in the November 2006 issues of Housing Studies.
Those minority neighborhoods “accounted for 40 percent of the 1995-2002 increase in conventional foreclosures,” they wrote. But those properties “represent[ed] only 9.2 percent of the owner-occupied housing units.”
Chicago foreclosures rose to 9,750 in 2002, but fell back to 7,900 in 2004 as President George W. Bush simultaneously boosted the economy and his political outreach to Hispanics by touting home ownership for poor Latino immigrants. By easing lending regulations, Bush’s “compassionate conservative” policy expanded the housing bubble to new Hispanic communities in Chicago and in California, Nevada, Florida and Arizona.
But Chicago led the national bust.
The city’s foreclosure numbers jumped to 14,600 in 2007, 20,000 in 2008 and 23,237 in 2009, according to National People’s Action, a nationwide umbrella group for community organizers.
In 2009, Citigroup foreclosed on 1,743 Chicago mortgages worth a total of $403 million.
Bankruptcies and foreclosures
As more minority homeowners received foreclosure notices, bankruptcies soon followed. Selma Buycks-Roberson received her own foreclosure notice in 2009, shortly before declaring her second bankruptcy.
In communities where African-Americans made up at least 80 percent of the residents, bankruptcies rose from 5,171 in 2006 to 8,951 in 2010, according to a May 2011 Woodstock Institute report titled “Bridging the Gap II.”
Bankruptcies were far more common among African-American women, the report noted. In majority-black neighborhoods between 2006 and 2010, “5.1 per 100 adult women filed [compared to] 1.2 per 100 adult women and 1.2 per 100 adult men in predominately white communities.”
As part of its 1998 class-action settlement, Citibank promised to welcome mortgage applications from African-American Chicagoans. There is no public record of their names, or of Citibank’s success in fulfilling that promise.
Citigroup, Clayton and Miner declined to provide The Daily Caller with a list of plaintiffs who applied for Citibank mortgages.
But the city’s public records show what happened to the three named plaintiffs, Buycks-Roberson, Brooks, and Calvin R. Roberson.
Brooks, the accountant, bought an upmarket house after the lawsuit was settled, where she still lives. She had joined the lawsuit in 1995 after Citibank refused to refinance her condominium mortgage in the upscale Hyde Park district.
“I was very angry” about the refusal, she said, even though she quickly got a mortgage from a rival bank.
Roberson was a manager at AT&T. There is no record of any foreclosure or bankruptcy under his address or name. He declined to respond to repeated requests for comment.
Buycks-Roberson, the lead plaintiff, claimed in the lawsuit that she had been denied a $43,700 refinance mortgage in 1992. Her annual income was said to be $47,000.
The lawsuit claimed Citibank said it had denied Buycks-Roberson’s loan application because of “delinquent credit obligations and other adverse credit,” and because her “income [did] not support the amount of credit requested.”
In the wake of her legal victory, Buycks-Roberson refinanced her debt load from at least $43,000 to at least $112,400 by 2006, according to a database maintained by the Cook County, Illinois Recorder of Deeds.
In 2001, she declared her first bankruptcy, leaving behind numerous creditors including Wells Fargo Home Mortgage.
Four mortgages later, she bankrupted again in 2008, leaving Chase Bank, plus Taylor, Bean & Whitaker Mortgage Corp. — but not Citigroup — with her bad debt, according to PACER, the federal courts records database.
Buycks-Roberson’s bad debts have since been absorbed by the shareholders of numerous retailers, companies and banks — and by the taxpayers who are backing Fannie Mae.
Taylor, Bean & Whitaker filed for a foreclosure on her house in 2008.
The case was continued until January 2011, when it was “voluntarily dismissed” by the lender.
Taylor, Bean & Whitaker was one of the nation’s largest mortgage-sellers, but it closed its doors in 2009 when a fraud investigation prompted Fannie Mae to stop buying its mortgages. The firm’s good and bad assets — including Buycks-Roberson’s mortgage — were parceled out to numerous companies including Fannie Mae.
The bubble bursts
Buycks-Roberson declined to comment when TheDC reached her on May 11. “I’m not interested. … I’ve no further information for you,” she said.
But her two bankruptcies and one foreclosure were only three drops in a flood that crippled the U.S. economy and wrecked African-American communities.
The collapse of the mortgage market took down Wall Street’s intricately balanced tower of stock options, derivatives and other financial dealings.
Citigroup’s cooperation with progressive activists and politicians was at its height in May 2007; its stock traded at $540 per share. By August 2008, the stock price had plummeted more than 90 percent.
One contributor to the collapse was the September 2007 decision by Rubin and other top Citigroup managers to buy Ameriquest, one of the nation’s large subprime sellers. That suicidal deal loaded the bank with roughly $45 billion in bad mortgage debt. Citigroup’s colossal crash destroyed roughly $900 billion in wealth held by investors, retirees, parents, union pension funds, employers and non-profit organizations.
And the economic fallout continues to accumulate: Nearly four years later, roughly one out of every seven American workers is still unemployed or has given up looking for work.
In December 2011, USA Today reported that “2.5 million homes have been lost to foreclosure since 2009 [and] an additional 4 million are in the foreclosure process or seriously delinquent.”
The crash dragged down housing prices by 34.4 percent below their July 2006 high, wiping out more than $1 trillion in wealth.
In January 2012, Chicago’s housing values were still dropping.
Ironically, African-Americans were hit especially hard by the unintended consequences of the progressives’ anti-redlining crusade.
Obama’ policies had sought to boost African-American home-ownership, but by 2009 the disastrous result was a 53 percent fall in the median wealth of black households, according to a July 2011 Pew Research Center report.
In late 2011, less than half of African-American men under 30 years of age were in the formal full-time workforce.
Hispanic homeowners were hit even harder because they were the last to catch the subprime gravy train. The housing collapse dropped Hispanic households’ median wealth by 66 percent, shoved their 2010 home-ownership rates back to the 2001 level of 47 percent, and pushed their formal unemployment rate above 10 percent.
The political payout
The real estate bubble was an economic gold mine for the principal coalition of political progressives, and the resulting economic disaster was their electoral gold mine.
Obama headed the coalition in 2008 and won the White House, largely because the public didn’t hold him responsible for the economic disaster but hoped he could reverse the downward slide.
Since then, Obama has nationalized the Chicago “solution.”
Obama’s allies and deputies expanded their regulatory control over the financial sector through the 2010 Dodd-Frank Act, whose regulatory ambition goes far beyond the 1990s-era laws and regulations that began the housing bubble.
Via the Federal Housing Administration, the Obama administration is providing mortgage loans to poor people who can only afford a down payment of 3.5 percent. That’s far less than the post-bubble requirement for 20 percent down from newly cautious commercial banks.
In March 2012, nearly 16 percent of FHA’s loans were delinquent, according the American Enterprise Institute’s “FHAwatch” website. If the economy turns worse, more of FHA’s low-margin, government-backed loans will go bad, and taxpayers will eat the cost.
Nationwide, 31 percent of homes remain underwater, according to Zillow’s May 24 statement. That’s two points worse than in early 2011.
But the banks exist to profit, so they surpassed their 2007 profit levels by netting $35.3 billion during the first three months of 2012. They are also still paying their progressive partners.
In February 2012, for example, Citigroup and four other banks offered $25 billion to settle a housing discrimination lawsuit filed by Obama’s deputies at the Department of Justice. California’s Democratic Attorney General is set to receive $540 million from that settlement.
Lisa Madigan, the Illinois Attorney General, will collect $110 million for her state, some of which will be distributed to the lawyers and counselors at Obama-allied housing groups in Chicago. The goal, Madigan declared, is “to remediate the effects of historic levels of foreclosures on homeowners and communities [with] funding for legal aid services, housing counseling, outreach to borrowers, housing policy development and community revitalization.”
Taxpayers’ money is also flowing to Chicago via the Treasury Department’s “Hardest Hit” program. A Chicago-based progressive housing activist named Joe McGavin was hired in 2011 to run the Illinois branch of the program, which is getting $445 million from a $7.6 billion federal fund that is intended to help people with less than $12,500 in “household liquid assets” pay their mortgages for a few months more.
Meanwhile, Obama is using the housing bubble’s damage to win re-election.
On the 2012 campaign trail, he blames the bubble for his administration’s record unemployment numbers, its deficits and its debt, while claiming Republicans created the bubble in the first place. The president, however, has never been questioned about his role in the scandal and the ensuing economic disaster.
He typically tries to disavow any responsibility, saying that he “inherited” the disaster from the GOP, Wall Street and Romney’s friends.
But sometimes the president spreads the blame far enough to include himself.
“We built a house of cards, and it ended up collapsing in the worst economic crisis since the Great Depression,” Obama said at a May 23, 2012 fundraiser in Atherton, California.
And the crash, Obama declared at a February 2012 campaign event in Falls Church, Va., created the “worst economic crisis of our lifetimes.”
“All of us must take responsibility for our own actions.”