How Obama and Valerie Jarrett Helped Launch Their Political Careers in an Outrageous 'Urban Renewal' Scheme
As President Obama's second term begins, and inequality, especially for black Americans, is worse than it was when Obama first took office, it's worth revisiting progressives' and Obama supporters' impression of the president as somebody who might actually care about equality and helping the most unfortunate in society. And a big centerpiece of that impression, which endures despite evidence that he's at best ambivalent, is his early days in Chicago. The narrative that Obama is a salt-of-the-earth community organizer has been spoon-fed to the American populace since Obama first began campaigning. In reality, there's a big piece of the president's past that has gone under-reported that will help us to understand Obama and his closest adviser Valerie Jarrett a bit better: Obama and Jarrett built the nexus of political support that took him to the presidency by participating in one of the most appalling examples of neoliberal-corrupted City Hall-"urban renewal projects" in recent history that enriched developers and investors and destroyed the lives of thousands of Chicago's poorest black residents, in some cases using his community organizer job as camouflage.
During a speech delivered at the Harlem Tenants Associations in November 2008, directly after Obama's presidential win, Fitch explained how the new president and other middle-class blacks, including Valerie Jarrett and Obama's wife Michelle, climbed the power ladder in Chicago at the expense of poor African Americans by aligning themselves with "friendly FIRE":
...[A]s Obama knows very well, for most of the last two decades in Chicago there’s been in place a very specific economic development plan. The plan was to make the South Side like the North Side. Which is the same kind of project as making the land north of Central Park like the land south of Central Park. The North Side is the area north of the Loop—Chicago’s midtown central business district—where rich white people live; they root for the Cubs. They’re neighborhood is called the Gold Coast.
For almost a hundred years in Chicago blacks have lived on the South Side close to Chicago’s factories and slaughter houses. And Cellular Field, home of the White Sox. The area where they lived was called the Black Belt or Bronzeville—and it’s the largest concentration of African American people in the U.S.—nearly 600,000 people—about twice the size of Harlem.
In the 1950s, big swaths of urban renewal were ripped through the black belt, demolishing private housing on the south east side. The argument then was that the old low rise private housing was old and unsuitable. Black people needed to be housed in new, high-rise public housing which the city built just east of the Dan Ryan Expressway. The Administration of the Chicago Housing Authority was widely acclaimed as the most corrupt, racist and incompetent in America. Gradually only the poorest of the poor lived there. And in the 1980s, the argument began to be made that the public housing needed to be demolished and the people moved back into private housing. …
If we examine more carefully the interests that Obama represents; if we look at his core financial supporters; as well as his inmost circle of advisors, we’ll see that they represent the primary activists in the demolition movement and the primary real estate beneficiaries of this transformation of public housing projects into condos and townhouses: the profitable creep of the Central Business District and elite residential neighborhoods southward; and the shifting of the pile of human misery about three miles further into the South Side and the south suburbs.
Obama’s political base comes primarily from Chicago FIRE—the finance, insurance and real estate industry. And the wealthiest families—the Pritzkers, the Crowns and the Levins. But it’s more than just Chicago FIRE. Also within Obama’s inner core of support are allies from the non-profit sector: the liberal foundations, the elite universities, the non-profit community developers and the real estate reverends who produce market rate housing with tax breaks from the city and who have been known to shout from the pulpit“ give us this day our Daley, Richard Daley bread.”
Aggregate them and what emerges is a constellation of interests around Obama that I call “Friendly FIRE.” Fire power disguised by the camouflage of community uplift; augmented by the authority of academia; greased by billions in foundation grants; and wired to conventional FIRE by the terms of the Community Reinvestment Act of 1995. And yet friendly FIRE is just as deadly as the conventional FIRE that comes from bankers and developers that we’re used to ducking from. It’s the whole condominium of interests whose advancement depends on the elimination of poor blacks from the community and their replacement by white people and—at least temporarily—by the black middle-class—who’ve gotten subprime mortgages—in a kind of redlining in reverse.
The public housing included in Senator Obama's transformation plans, such as the 504 apartments in the squat brick buildings of Grove Parc Plaza, quickly fell into disrepair. Reports emerged of uninhabitable units with collapsed roofs, fire damage, mice infestations, and sewage backups. In 2006, federal inspectors graded the condition of the complex an 11 on a 100-point scale, a score so bad the buildings were demolished in 2011.
A Boston Globe review found that thousands of apartments across Chicago that had been built with local, state and federal subsidies -- including several hundred in Obama's former district -- deteriorated so completely they were no longer habitable. Grove Parc, a project that was, along with several other prominent failures, developed and managed by Obama's close friends and political supporters, became a symbol of the broader failures of handing over public subsidies to FIRE cronies, private companies to build and manage affordable housing, an approach lauded by Obama as the best, sometimes only, replacement for public housing.
At the time, Jarrett was the chief executive of Habitat Co., which managed Grove Parc Plaza from 2001 until the winter of 2008 and co-managed an even larger subsidized complex in Chicago that was seized by the federal government in 2006 after city inspectors found widespread problems. Jarrett had earlier served as Commissioner of the Department of Planning and Development from 1992 through 1995. When questioned by the Globe, Jarrett defended Obama's position that public-private partnerships are superior to public housing.
But as theGlobe pointed out, Daley's plans to privatize Chicago public housing quickly drew criticism:
"Government is just not as good at owning and managing as the private sector because the incentives are not there," said Jarrett, whose company manages more than 23,000 apartments. "I would argue that someone living in a poor neighborhood that isn't 100 percent public housing is by definition better off."
[Chicagoans] asked why the government should pay developers to perform a basic public service -- one successfully performed by governments in other cities. And they noted that privately managed projects had a history of deteriorating because guaranteed government rent subsidies left companies with little incentive to spend money on maintenance.
Most of all, they alleged that Chicago was interested primarily in redeveloping projects close to the Loop, the downtown area that was seeing a surge of private development activity, shunting poor families to neighborhoods farther from the city center. Only about one in three residents was able to return to the redeveloped projects.
"They are rapidly displacing poor people, and these companies are profiting from this displacement," said Matt Ginsberg-Jaeckle of Southside Together Organizing for Power, a community group that seeks to help tenants stay in the same neighborhoods.
"The same exact people who ran these places into the ground," the private companies paid to build and manage the city's affordable housing, "now are profiting by redeveloping them."
Obama believes deeply that privatization works. He once told theChicago Tribune that he had briefly considered becoming a developer of affordable housing, but after graduating from Harvard Law School in 1991, he turned down a job with Tony Rezko's development company, Rezmar, to instead work at the civil rights law firm Davis, Miner, Barnhill & Galland. The firm represented a number of nonprofit companies that were partnering with private developers to build affordable housing with government subsidies.
The Globe reported that shortly after becoming a state senator in 1997, Obama told theChicago Daily Law Bulletinthat his experience working with the development industry had reinforced his belief in subsidizing private developers of affordable housing. "That's an example of a smart policy," the paper quoted Obama as saying. "The developers were thinking in market terms and operating under the rules of the marketplace; but at the same time, we had government supporting and subsidizing those efforts."
What Obama is describing is corporate welfare: the government subsidizes private companies which then lack incentive to provide services to tenants because the government i.e. taxpayers will continue funding them regardless, and then the same private companies win new contracts down the road when they demolish and rebuild apartments as part of a "revitalizing" scheme.
Oftentimes, Obama's community organizer veneer served to camouflage his FIRE roots. For example, Grove Parc Plaza opened in 1990 as a redevelopment of an older housing complex, and the new owner was a local nonprofit company called Woodlawn Preservation and Investment Corp, led by two of the neighborhoods' most powerful ministers, Arthur Brazier and Leon Finney. All of this sounded like grassroots in action. However, Woodlawn Preservation hired a private management firm, William Moorehead and Associates, to oversee the complex. The company then lost that contract and a contract to manage several public housing projects for allegedly failing to do its job, and was subsequently convicted of embezzling almost $1 million in management fees, theGlobe reported.
Woodlawn Preservation then hired a new property manager, Habitat Co., where Valerie Jarrett served as executive vice president. Residents told the Globe that the complex deteriorated under Moorehead's management and the decline continued after Habitat took over. A maintenance worker at the complex told the Globe that money often wasn't available for steel wool to plug rat holes, but regardless federal inspectors rated Grove Parc an 82 out of 100 as late as 2003.
In their extensive report on Obama's private-public partnership failings, theGlobe profiles one of the largest recipients of government subsidies: Rezmar Corp, founded in 1989 by Tony Rezko, who between 1999 and 2008 used more than $87 million in government grants, loans, and tax credits to renovate about 1,000 apartments in 30 Chicago buildings. Companies run by the partners also managed many of the buildings, collecting government rent subsidies. Neither Rezko, nor his partner Daniel Mahru, had any development experience:
Rezmar collected millions in development fees but fell behind on mortgage payments almost immediately. On its first project, the city government agreed to reduce the company's monthly payments from almost $3,000 to less than $500.
By the time Obama entered the state senate in 1997, the buildings were beginning to deteriorate. In January 1997, the city sued Rezmar for failing to provide adequate heat in a South Side building in the middle of an unusually cold winter. It was one of more than two dozen housing-complaint suits filed by the city against Rezmar for violations at its properties.
People who lived in some of the Rezmar buildings say trash was not picked up and maintenance problems were ignored. Roofs leaked, windows whistled, insects moved in.
"In the winter I can feel the cold air coming through the walls and the sockets," said Anthony Frizzell, 57, who has lived for almost two decades in a Rezmar building on South Greenwood Avenue. "They didn't insulate it or nothing."
"Affordable housing run by private companies just doesn't work," Mahru told the Globe. "It's difficult, if not impossible, for a private company to maintain affordable housing for low-income tenants."
Most of Rezko and Mahru's buildings have since been foreclosed upon, forcing the tenants to find new housing.
When Obama opened his campaign for state senate in 1995, Rezko's companies gave $2,000 on the first day of fundraising, and as the Globepoints out, essentially "seeded the start of Obama's political career."
While Obama eventually distanced himself from Rezko, he maintained close ties to other developers. Jarrett became a close adviser, and Obama chose Martin Nesbitt, chairman of the Chicago Housing Authority, as his campaign treasurer. Nesbitt was one of the key overseers of the shift toward private management and development. And Obama kept the rich families around him.
From the Globe story:
As a result, some people in Chicago's poorest neighborhoods are torn between a natural inclination to support Obama and a concern about his relationships with the developers they hold responsible for Chicago's affordable housing failures. Some housing advocates worry that Obama has not learned from those failures.
"I'm not against Barack Obama," said Willie J.R. Fleming, an organizer with the Coalition to Protect Public Housing and a former public housing resident. "What I am against is some of the people around him."
Jamie Kalven, a longtime Chicago housing activist, put it this way: "I hope there is not much predictive value in his history and in his involvement with that community."
In a 2012 Harpersmagazinearticle, Ben Austen writes that the area around Cabrini-Green no longer resembles the neighborhood he remembered from his years growing up in Chicago in the '70s and '80s.
Down the street from 1230 N. Burling stood a mixed-income development of orange-bricked condos and townhomes called Parkside of Old Town. Its squat buildings were outfitted with balconies and adorned with purple ornamentation and decorative pillars. There was a new school, a new police station, a renovated park, and a shopping center with a Dominick’s supermarket and a Starbucks. A Target was expected on the site the last tower would soon vacate. Later, I would warm up two blocks south in @Spot Café, where employees from Groupon’s nearby corporate headquarters streamed in to pay full price for lattes and panini.
Today, what seems harder to fathom than the erasure of entire high-rise neighborhoods is that they were ever erected in the first place. For years the projects had stood as monuments to a bygone effort to provide affordable housing for the poor and working-class, the reflection of a belief in a deeper social contract.
Shortly before the demolition of 1230 N. Burling in 2012, Austen attended a Chicago Housing Authority meeting during which residents protested the board in response to the city forcing poor people off prime real estate. Activists included residents and supporters of a housing project called Lathrop Homes, a development in a well-off section of the North Side that was next in line to be demolished.
“The residents didn’t want to be forced into the private market or into temporary housing, especially since they doubted they’d be able to return to whatever replaced Lathrop; nor did they agree that market-rate apartments were needed in the redeveloped community, as the surrounding area was already full of market-rate condos,” Austen wrote.
Chicago’s $1.6 billion “Plan for Transformation” envisioned a mix of public-housing residents with market-rate condos and subsidized rentals or homes, with one-third of each in these new communities.
In late 2012, NPR detailed how after more than a decade in the works, one of the country’s most closely watched public housing experiments was badly failing, partly due to the flailing economy.
Thomas has lived here for eight years with her husband and 7-year-old son. Lathrop sits on what many now consider prime land, next to the Chicago River. A busy street splits the development into a north and south section.
The north side is completely shuttered, cordoned off by gates, a ghost town of boarded-up buildings. Thomas lives in the open southern section, where steam from the old heating system wafts into the street. About 170 of the 900-plus units are occupied.
Thomas says all three of the concepts for Lathrop should be dumped and there should be more input from residents. She says there's little affordable housing in the area and there's no need for market-rate units at all.
Far from adopting a reflective attitude in the wake of Chicago’s failed experiment in public-private housing partnerships, Obama has now taken his love of public-private codependence to a national level, touting public-private partnerships in everything from creating jobs to education to tackling insurance fraud to collaborations involving foreign nations, which you can bet means the wealthiest multinational conglomerates teaming up to increase their profits at the expense of the 99 percent.
"This is a dangerous precedent that could have catastrophic effects in poor neighborhoods across the country. Congress needs to hold hearings about the problems facing emergency patients. If other community, non-profit hospitals follow this example and shift the lion’s share of resources to its high-revenue elective patients and procedures, it will leave many emergency patients virtually out in the cold. The University of Chicago Medical Center is located in a poor neighborhood whose residents have few, if any, other options for emergency care."The media barely paid any attention to Michelle Obama's role in all of this, though the Chicago Sun-Times reported in 2008 that her $317,000-a-year role as Vice-President of the hospital helped create the patient-dumping program.
"If you put enough money into it, you could save a whole bunch of community health centers," Young said. "But to date, they haven't."
Edward Novak, president of Chicago's Sacred Heart Hospital, declined to discuss the center's initiative in particular but dismissed as "bull" attempts to justify such programs as good for patients. "What they're really saying is, 'Don't use our emergency room because it will cost us money, and we don't want the public-aid population,' " Novak said.
At the end of January this year, community residents launched a protest outside the University of Chicago Medical Center, angry that the hospital ignored their needs, especially for "victims of gun violence," according to a news report: "One woman said her son, shot just blocks away from the university, died on the way to a hospital ten miles away." Four were arrested at the protest.
Robert Fitch’s words hold true: the poor remain at the mercy of the rich, who are seeking profits on everything possible, including their homes, but also their water, healthcare and education.