After Chicago, Rahm Emanuel Heads to Wall Street. But Was He Helping Wall Street All Along?
by Alyxandra Goodwin, Research Analyst
Former Mayor of Chicago Rahm Emanuel is headed to Wall Street. We don’t know what he will be up to when he starts his new gig, but if past actions are any indication, we can bet he’ll be sharing insights on how to further extract wealth from marginalized communities. Chicago is one of the most segregated cities in the U.S., and decades of bad deals with Wall Street have only made problems for low-income communities of color worse. While wealthy communities receive development and investment, low-income communities of color receive physical and economic violence on a grand scale. This is a direct result of the policies which the Emanuel administration instituted or upheld, routinely prioritizing the interests of a wealthy few over its constituents.
At ACRE we are working to both expose the Wall Street’s practices that prop up the system of Racial Capitalism and to provide tools for communities to fight back. We know that toppling the systemic forces that target us is the only way for all of our communities to thrive.
Present day Chicago provides an excellent example of some of the main tools of Racial Capitalism in practice — namely financialization, privatization and neoliberalism.
Financialization is the expansion of the finance industry into every aspect of our everyday lives, using debt as the main way in and a means of control. It primarily targets communities of color.
Privatization is when a service or utility once run by a public entity is shifted to private ownership.
Neoliberalism — A condition that makes privatization more possible by relying on market solutions for problems. Deregulation, free trade and an emphasis on personal responsibility over the common good are all hallmarks of neoliberalism.
To better illustrate what these terms can mean in practice, we’ll lift up some concrete examples from Chicago:
1. City Budgets
Chicago has a history of engaging in complex and bad finance deals, putting itself into a cycle of predatory debt. Cities taking out debt for long term projects is sensible policy because many investments a city makes benefit residents for years to come. However, using predatory deals to make short term purchases or fill budget deficits is reckless. Under the Daley-Emanuel era, Chicago made risky bad deals a habit, borrowing to pay for things such as, trash cans, flowers, police settlements, and even interest payments on older bonds. All of these deals helped enrich Wall Street while putting the city on shakier financial ground. The fact that payments to bondholders and Wall Street are prioritized over necessary public goods and services makes the problem even greater. This means Chicago schools, roads, transit system and more all are only left with what Wall Street doesn’t snatch up. Between 2010 and 2016, 30–46% of property taxes went to paying off the city’s debt, and the city’s highest in the nation’s sales tax is diverted first to bondholders.
2. Education
In 2013 Chicago closed 49 of schools due to a budget deficit. In reality, that budget deficit was triggered years prior through a string of bad deals. In the 90’s, Chicago Public Schools issued Capital Appreciation Bonds or CABs, which are long-term bonds with compounding interest and the inability to pay early without steep fees. These CABs turned an initial principal borrowed amount of $666.2 million into more than a $2 billion cost to repay across just 3 bonds. Elsewhere in the school budget, bad “interest rate swap” deals resulted in a $263 termination fee when the city’s credit was downgraded. Deals like these contributed heavily to CPS’ mounting debt. The Daley-Emanuel regime had the option to both reclaim the power in the city’s relationship with Wall Street and institute progressive revenue on the city’s wealthiest corporations and residents, but instead chose not to and Chicago parents and students are left with the monumental consequences to this day.
3. Policing and Incarceration
The Chicago Police Department accounts for 40% of the City’s official budget. This percentage does not include the millions spent on things such as settlements and surveillance technology, expenses which support the infrastructure of policing, but sit elsewhere in the budget. Our report released last year shows how Chicago and other cities use bond proceeds to pay for police brutality and misconduct settlements. ACRE found that Chicago borrowed $484.3 million from 2010–2017 to pay for judgements and settlements, an amount roughly equivalent to what the city paid for police related settlements and judgements during that period. This borrowing not only adds to the city’s debt tally, but shifts the burden of police misconduct to the same communities that are impacted by police violence. While we encourage the city to fully pay out police settlements, this money needs to come from the police budget, not by issuing long term predatory deals which further cut services to low income communities of color.
4. Jobs and Housing
Chicago is experiencing a steady decline in population with 12,000 Black people leaving the city each year. This exodus is likely a result of divestment of public education, low access to jobs and quality-paying work, and rising costs of living. In the past two years the number of low-income renters dropped by 18%. Across Chicago, developers are buying up land, raising rents and pushing low-income residents out of neighborhoods. The city has the power to champion rent control policies, but instead chooses to side with wealthy developers.
A staggering 45% of young Black men in Chicago are out of work. Any number of social programs could help decrease that staggering number and put young black Chicagoans to work. Instead, the city chose to offer over $2 billion in tax breaks and financial incentives to Amazon to lure the tech giant to the city to build its HQ2 site. Amazon of course made no promises that the incoming jobs would be for the Chicagoans who were jobless.
All of these examples document the way that City of Chicago has prioritized the finance sector and wealthy interests over its low-income residents of color. These choices solidify an agenda that encourages privatization and neoliberal values. In fact, many cities have examples quite similar to Chicago. Earlier this year we released the report “World-Class City: A financial blueprint for the city that Chicagoans Deserve”. In the report we offer a blueprint that would hold banks accountable for the originally bad deals and make the wealthy counterparts of Chicago pay their fair share, instead of shifting the burden to low income Chicagoans. ACRE is honored to stand with community organizations in the city to fight to ensure that the City of Chicago implements policies that will actually improve the lives of the people who live here. Chicagoans deserve a city with world-class services and infrastructure and takes care of its residents and makes a deliberate plan to right historical inequities! The examples above are Chicago’s past and present, but need not be Chicago’s future if we fight.
