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How Obama and Valerie Jarrett Helped Launch Their Political Careers in an Outrageous 'Urban Renewal' Scheme

Developers and investors got rich on a project that destroyed the homes of thousands of Chicago's poorest black residents.

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But as the Globe pointed out, Daley's plans to privatize Chicago public housing quickly drew criticism:

[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 the Chicago 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 the Chicago Daily Law Bulletin that 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, the Globe 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, the Globe 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:

 
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