Burning Down the House, Chicago-Style

“Obama’s previously unrecognized contribution to the nation’s subprime disaster will likely be highlighted in the 2012 election season, As Neil Munro writes today at the Daily Caller. And he’s just the man to do it, via a lengthy and detailed article titled, “With landmark lawsuit, Barack Obama pushed banks to give subprime loans to Chicago’s African-Americans:”

The Chicago Sun-Times reported in 1998 that Obama claimed $23,000 in billable hours for his role in the lawsuit. That role was limited, partly because he was networking his way toward his 1996 election to the Illinois Senate. But he stayed with the firm until 2004, and it was his lawsuit.

Obama also won massive campaign donations from the mortgage industry, including at least $126,349 between 1989 and 2004.

He sought public credit for the lawsuit: His employer submitted a docket to the court that listed him as the lead attorney for two of the three named plaintiffs in the case. The docket bound Obama’s name to the lawsuit — and to the 186 clients who would soon follow.

Obama also used his courtroom work to win a keynote speaking slot at an important conference of Chicago housing groups in 1996. Friends said “‘he’s really thoughtful, [and] he’s done some work as an attorney in these communities,’” Joel Bookman, director of programs for the influential Local Initiatives Support Corporation, which organized the event, told TheDC.

Obama endorsed the national subprime policy, telling a Wall Street audience in September 2007 that “subprime lending started off as a good idea: Helping Americans buy homes who couldn’t previously afford to.”

But by then, the disastrous impact of the top-down subprime policy was obvious, so Obama so tried to push the blame on the banks. “They began to lower their standards. … Most everyone knew that some of these deals were just too good to be true,” he told his Wall Street audience, “but all that money flowing in made it tempting to look the other way.”

And what happened to those 186 clients? If this was an article appearing at Bloomberg.com, the word “unexpectedly” would be uttered right about now at the all-too-predictable aftermath:

Bankruptcies

At least 46 of Obama’s 186 clients have declared bankruptcy since 1996, often multiple times.

That’s a far higher bankruptcy rate than the rate for all Americans, for Chicagoans and even for African-Americans in Chicago.

In a 2011 report, the left-of-center Woodstock Institute reported that just 4.25 percent of African-Americans living in Chicago’s mostly black neighborhoods went bankrupt between 2006 and 2010.

By contrast, 11 of Obama’s 186 clients — or 6.6 percent — went bankrupt during the same five-year period.

That bankruptcy is 50 percent higher than the rate among Cook County’s African-American population, and almost three times the bankruptcy rate of all Cook county residents, according to data in the Woodstock report, titled “Bridging the Gap II.”

Foreclosures

At least 55 of Obama’s 186 clients received foreclosure notices after 1998 — many of them multiple times. Foreclosures were finalized for at least 39 homeowners, or 20 percent.

That’s at least 20 times the rate at which prime loans foreclose over their lifetimes, and roughly three times the lifetime foreclosure rate of subprime loans.

Ten more of the 55 foreclosures are in process according to PACER, the federal government’s judicial records database.

The number of foreclosures may be near 70. That’s because the court database shows foreclosures by 16 people who share full names with his clients, including Donald Young and James E. Jones.

The clients’ foreclosure rate was far higher than that of other homeowners. In 2009, for example, at least seven of Obama’s former clients got foreclosure notices. That’s roughly twice the rate of completed 2009 foreclosures in Chicago’s minority neighborhoods, according to a 2010 report by the left-wing housing activist group National People’s Action.

That 2009 rate is also roughly eight times the nation’s post-bubble foreclosure rate of 0.5 percent per year, according to a report by the government’s Federal Deposit Insurance Corp.

2009 wasn’t an aberration: Obama’s client list had averaged 5.3 foreclosure notices a year during the 1990s.

The foreclosures temporarily halted in 2010, but are expected to accelerate following a 2012 federal government deal with several major banks.

Nationwide, another 5 million home owners are expected to get new notices between 2012 and the end of 2015, according to Moody Analytics. In May, 1.5 million homes were 90 days or more behind in payments.

More of Obama’s clients likely will be on that list.