Obama’s early Chicago rise brought African-Americans foreclosures, bankruptcies

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.