Obamas Real Estate Bust

Discussion in 'Politics' started by OldTrader, Sep 22, 2008.

  1. Obama’s Real-Estate Bust
    He did for Illinois taxpayers what shady mortgage lenders have done for the economy.

    By David Freddoso

    Last week, Sen. Barack Obama compared the Savings and Loan bailout of the late 1980s to the situation of the mortgage-securities markets today:

    Too many S&Ls took advantage of the lax rules set by Washington to gamble that they could make big money in speculative real estate. . . . [T]hey made hundreds of billions in bad loans, knowing that if they lost money, the government would bail them out. And they were right. The gambles did not pay off, our economy went into recession, and the taxpayers ended up footing the bill. Sound familiar?

    Indeed, it does sound familiar — it sounds a lot like what Barack Obama did to Illinois taxpayers as a state senator in Springfield. Using his elected office and his clout, Obama helped Tony Rezko and other unscrupulous low-income housing developers obtain millions of dollars in state grants, tax credits, low-interest loans, and regulatory advantages.

    Taxpayers had no serious chance of recouping these “investments” in Rezko and other developers. And many beneficiaries went one step farther, depriving the public of even the benefits they could have gotten. These developers took government help to build low-income housing, and then let their buildings deteriorate into uninhabitable slums.

    To date, the most complete account of this sad story is Binyamin Appelbaum’s piece in the Boston Globe. Not only does it demonstrate the monumental failure of the low-income-housing policy that Obama vocally championed as a state senator, it gives a detailed look at how some of Obama’s donors and friends — the beneficiaries of that policy — neglected their own housing developments at the expense of the inhabitants.

    There is no indication that Obama approved (or even knew) of the massive and systemic neglect of these properties in his own state-senate district. But there is also no question that he was an enabler in these transactions. He cosponsored at least six bills to give special tax breaks, tax credits, building-and-maintenance subsidies, and zoning exemptions to the developers. In 1998, he wrote letters to state and city officials requesting $14 million for a project developed by Tony Rezko and another close Obama friend — the politician’s old law-firm boss, Allison Davis.

    In his Globe piece, Appelbaum describes the low-income Grove Parc Plaza complex, which was developed by Davis:

    Mice scamper through the halls. Battered mailboxes hang open. Sewage backs up into kitchen sinks. In 2006, federal inspectors graded the condition of the complex an 11 on a 100-point scale — a score so bad the buildings now face demolition.

    Sewage backups seem to be a common problem in Davis’s low-income slums — another of his buildings, Appelbaum reports, was cited in 2007 “after chronic plumbing failures resulted in raw sewage spilling into several apartments.”

    Valerie Jarrett, Obama’s campaign adviser and the subject of a recent fawning interview by Katie Couric, is the chief executive of the company that managed that Grove Parc slum until just recently. Appelbaum writes that her company managed another housing complex until its condition became so poor that the federal government seized it in 2006.

    Cecil Butler, another Obama donor, had his Lawndale Restoration complex confiscated by the government in 2006 “after city inspectors found more than 1,800 code violations.”

    Appelbaum’s piece gives some sense of just how closely Obama was, and still is, tied to the slum-lord world. He’s taken contributions from its big players and pushed legislation favorable to them. His closest ally in that sphere has been Rezko, who raised $250,000 for Obama’s campaigns before being convicted on unrelated corruption charges earlier this year.

    Rezko had been leveraging his fundraising abilities to win alliances with other politicians long before Obama got his start. He applied for his first subsidized-housing loan from the City of Chicago six days after Mayor Richard M. Daley’s election in 1989. Within the first six years of Daley’s reign, Rezko’s company, Rezmar, received $24 million in government loans and $8.5 million in federal tax credits. Over the following decade, it would rake in more than $100 million in loans from the city, state, and federal governments, as well as private bank loans to fix up 30 Chicago buildings for low-income public housing.

    Despite all this cheap and free taxpayer money, all of Rezko’s 30 buildings eventually ran into financial difficulties. As of 2007, 17 had gone into foreclosure. Six were boarded up and abandoned.

    The City of Chicago sued Rezmar at least a dozen times for failing to heat its properties. During the winter of 1997, Rezmar claimed it lacked the funds to heat a 31-unit building in Englewood on the south side of Chicago — one of eleven Rezmar buildings in Obama’s state-senate district. Tenants there went without heat from late December 1996 through mid-February 1997. Despite his company’s financial hardship, Rezko signed a $1,000 check for the campaign fund of the newly elected state senator Barack Obama on January 14, 1997.

    When Barack Obama talks about risky real-estate investments and failures of government oversight, remember how he put Illinois taxpayers on the hook for some of the worst real-estate investments of all — investments in his close friend and in other slum landlords who took the public’s money and betrayed their trust.

    — David Freddoso is a staff reporter for National Review Online and author of The Case Against Barack Obama