Campaign News

The president of the Federal Reserve Bank of Minneapolis met with activists and northside residents Wednesday over racial and economic disparities.

Neel Kashkari talked with leaders from Neighborhoods Organizing for Change for an hour — an unusual meeting of a banking insider and a group known for street demonstrations and putting political pressure on the powers that be.

"A big part of my job is to get out and understand first hand what is happening, what are the challenges," said Kashkari who has served on the central bank system since January.

In that time, the former head of the federal government's bank bailout program in 2008 has drawn attention for his warning that failure of some big banks could lead to another financial crisis.

Kashkari said that the Fed's monetary policy can have an effect on unemployment, interest rates and inflation, but he said Congress' fiscal policy will also be key in addressing racial disparities.

Anthony Newby, executive director of Neighborhoods Organizing for Change, said they talked about the high unemployment rate among African-Americans.

"Now we can spend more time collaborating, doing a deeper dive and figure out what are the structural barriers and then what can the Fed do to bridge that gap," Newby said. "That's a big deal and big starting point."

Newby added he was pleased to have someone in Kashkari's position listening to real people struggling to make ends meet.

Kashkari agreed to meet with them again.

By PETER COX 

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Crooks and Liars - October 2, 2014, by Karoli - What could $30 million lost dollars mean to students in Pennsylvania? Maybe more teachers, more textbooks, better classrooms? Well, forget about it, because at least that much is in the pockets of corrupt charter school operators.

The waste and fraud in Pennsylvania charter schools is even worse than I thought. It was bad enough when Nicholas Trombetta created a nice pyramid to skim off millions in public education money to fund his own fun, but it seems he was more the rule than the exception.

Philly.com:

The instances of fraud cited in the new report include cases where charter officials were indicted or pleaded guilty and instances uncovered in state audits.

Examples include Nicholas Trombetta, founder and former CEO of the Pennsylvania Cyber Charter School in Midland, who is awaiting federal trial in Pittsburgh on charges that he diverted $8 million in school funds for personal use.

The tally also includes $6.3 million that federal prosecutors allege Dorothy June Brown defrauded from the four Philadelphia-area charters she founded.

But the authors give special attention to another recent case involving a city charter: New Media Technology Charter School in the city's Stenton section. The former CEO and founding board president went to federal prison in 2012 after admitting they stole $522,000 in taxpayer money to prop up a restaurant, a health-food store, and a private school they controlled, and for defrauding a bank.

From 2005 to 2009, when the crimes were occurring, third-party auditors hired by New Media failed to spot the fraudulent payments.

"Fraud detection in Pennsylvania charter schools should not be dependent upon parent complaints, media exposés, and whistle-blowers," the authors wrote. Rather, they urged, the system should be proactive and use forensic accounting methods.

But that would mean Tom Corbett couldn't make his sweet deals with the charter operators! Perish the thought.

What we have here is the sale of our public schools by Republicans to for-profit concerns who are perfectly content to take taxpayers' money to pad their own bottom lines while making sure our children 'isn't learning.'

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New York Times - January 11, 2014, by Shaila Dewan - You can’t fight city hall, the saying goes. But Gayle McLaughlin, the mayor of Richmond, Calif., a city of 100,000 souls, would tell you that fighting Wall Street is harder. Even for city hall.

Ms. McLaughlin has a plan to help the many Richmond residents who owe more money on their houses than their houses are worth, but it’s one that banks like Wells Fargo, large asset managers like Pimco and BlackRock, real estate interests and even Fannie Mae and Freddie Mac, the mortgage finance giants, have tried to quash. Her idea involves a novel use of the power of eminent domain to bail out homeowners by buying up and then forgiving mortgage debt.

But the financial institutions have warned that mortgage lending would halt in any city that tried eminent domain — and they have lobbied Congress to ensure that the threat is not an empty one. Opponents have filed federal lawsuits, while real estate interests have made robocalls to residents and sent mass mailers warning that the plan would allow “slick, politically connected” investors to “take houses on the cheap.” (The idea is actually to buy mortgages, not houses.)

Under similar pressures, at least four other cities that considered the eminent domain strategy have backed away, deeming the risks too great. But advocates in Richmond say their city is different. They hope a unique alignment of anti-corporate political leadership, a concerted grass-roots campaign and union support will lead to a different outcome in this working-class, largely black and Hispanic community in the Bay Area. For a dozen or so other cities that have similar demographics and are also plagued by foreclosures, Richmond has become a national test case.

Those cities, scattered in states from New Jersey to Washington, have watched as the controversial proposal has threatened Richmond’s access to capital: When the city tried to market a highly rated set of bonds in mid-August last year, there were no takers.

In September, the Richmond City Council was preparing to take one of a series of votes on the eminent domain proposal. Before the meeting, opponents amassed at a hot-dog stand near city hall. A local real estate association, backed by money from the National Association of Realtors, offered free dinners to those who showed up to don red “A Bad Deal for Richmond” T-shirts; the group included a huddle of fraternity brothers brought in from Berkeley. If eminent domain were used, a young man who declined to identify himself was telling them, a for-profit company would make big money, and teacher and firefighter pensions would be hurt.

The eminent-domain strategy is not a fabulous idea. Like virtually every other proposal to help homeowners hurt by the housing crash, it tries for simplicity but falters in the face of the enormity of the post-financial-crisis mess, and, as markets improve, it may come too late to make much difference. The plan’s legality and wisdom have been debated in editorials and blog posts, with questions ranging from the true value of the mortgages to whether the chosen homeowners deserve the help.

But to advocates, eminent domain offers perhaps the only chance to remedy the failure of the federal government and mortgage servicers to offer widespread, meaningful relief to the hardest-hit communities.

Housing markets around the country may be improving, but about 28 percent of all mortgages in Richmond are deeply underwater (meaning that the homeowners owe significantly more than their homes are worth), compared with 19 percent nationally, according to RealtyTrac.

The local foreclosure rate is declining, but it’s still much higher than the national one. In light of this, the mayor shows no sign of backing down. “The risk that is really confronting us,” she said, “is waiting on the sidelines for the next wave of foreclosures.”

When the council first voted on eminent domain, in April, members were unanimously in favor. But then the opposition campaign began. Ms. McLaughlin predicted that her motion that September night would pass with five of seven council votes, but it squeaked by with just four. Jeffrey Wright, a real estate broker who is leading the local opposition, was satisfied.

“This underwater mortgage bailout program,” he said later, “is on life support.”

The day after the vote, Ms. McLaughlin was in her office, working on an entirely different project: getting ready for a trip to Ecuador, at the invitation of that country’s president, to tour the damage that courts there have ruled was caused by oil drilling by Texaco, now owned by Chevron.

It is Chevron, not mortgage debt relief, that has defined much of Ms. McLaughlin’s tenure. The company, which has a large refinery in Richmond, is the city’s largest taxpayer and employer, and Ms. McLaughlin has led the fight — first as an activist, and then as mayor — to force Chevron to pay higher taxes and to pay more damages after a refinery explosion last year sent thousands of area residents to emergency rooms.

A longtime advocate of left-wing causes, Ms. McLaughlin, a Green Party member, is part of a Richmond political alliance that has vowed not to accept corporate campaign donations. In 2010, she was re-elected over a Chevron-backed challenger. She helped ease policies that criminalized homelessness and harried illegal immigrants, and brought a solar panel factory and a branch of the Lawrence Berkeley National Laboratory to town.

But Richmond was staggered by the recession. Homes in the city lost 66 percent of their value, on average, and are still worth less than half what they were at their peak, in January 2006. Some 16 percent of homeowners lost their homes in foreclosure, leaving so many scars on neighborhoods that the city began fining banks $1,000 a day if they failed to maintain their property; the city has collected $1.5 million so far.

Richmond held sessions where homeowners could meet with bank representatives and legal aid groups, but too often, the mayor says, the efforts came to naught. Last summer, underwater homeowners owed, on average, 45 percent more than the value of their homes, according to the city manager.

So the mayor was all ears when she heard about the eminent domain plan, from both Mortgage Resolution Partners, a company that hopes to make money by administering and financing the plan for many cities, and from her longtime ally, the Alliance of Californians for Community Empowerment, an offshoot of Acorn.

The A.C.C.E. thought an earlier attempt to use eminent domain, in San Bernardino County, had failed because of a lack of grass-roots support. So in Richmond it held a door-knocking campaign. Its success was seen when more than 100 people, most in favor, signed up to speak at the September meeting. It lasted seven hours.

Using eminent domain to heal the wounds of the mortgage crisis has been called crazy, unconstitutional and even “one of the worst ideas ever.” But it is not so far removed from mainstream thinking. In 2008, Senator John McCain of Arizona, then the Republican presidential candidate, suggested using $300 billion in federal bailout money to buy troubled mortgages and write them down.

The problem was that the mortgages had been bundled into pools and resold to thousands of investors all over the world. The rules governing many of the pools forbade the investors’ representative, known as the trustee, from selling off mortgages or modifying them unless they were already in default, even though it might be in the investors’ interest to do so.

Scholars suggested that eminent domain could give trustees the legal cover they needed to get rid of the bad loans. So far, though, the investors have not seen it that way. In Richmond, investors (including BlackRock and Pimco) asked their trustees, Wells Fargo and Deutsche Bank, to sue the city to stop the program.

Eminent domain allows governments to condemn property for a public purpose, like building a road or eliminating urban decay, and applies to intangible property like mortgages as well as to real estate. Richmond argues that its public purpose is to prevent foreclosures and the blight of vacant properties. The idea is to buy those mortgages out of the bundles and restructure them, restoring equity to the homeowners and keep them from defaulting.

Opponents of the plan argue in legal briefs that the risk of default now, so long after the crash, is vastly overstated. More than half of the 624 homeowners initially identified for the program are current on their payments. Not only that, 91 of the loans have already received a modification that included debt forgiveness — though many early modifications were unsustainable. Then there is the question of whether homeowners who got cash by refinancing their homes during the bubble — taking out new, riskier mortgages, as many of these did — deserve help now. (Ms. McLaughlin says the homeowners fell prey to unscrupulous lenders.) Lastly, opponents calculate that with rising home values, almost a third of the homeowners aren’t even underwater, a figure that Mortgage Resolution Partners disputes.

Opponents argue that the plan may help certain homeowners but hurt other working-class people whose pension funds invested in the loans. But pensioners and those stuck in underwater mortgages are often the same people, said Stephen Abrecht, an official of the Service Employees International Union, which supports the use of eminent domain. “We have members who are locked into these kinds of situations and can’t get out of it,” he said. “We think it’s a drag on the economy and we’re interested in seeing the economy take off again.”

Mr. Wright, the real estate agent, said that what bothers him most about the plan is that it will help so few; no one with loans backed by Fannie Mae or Freddie Mac, which guarantee a majority of mortgages, is included. “They’re bearing these placards saying, ‘Save our homes’ and they don’t even realize that this program won’t benefit them,” he says. “There’s a lot of false hope and that irritates me, that really irritates me.”

Wall Street also objects to the plan on principle, portraying it not as a targeted response to an extraordinary event — the housing crash — but as a dangerous precedent that disrupts contracts and would all but end mortgage lending.

“Why would anybody think that private investors would provide additional capital to the mortgage finance market when somebody thinks it’s O.K. to take it from them?” asked Tim Cameron, the head of the asset management group for the Securities Industry and Financial Markets Association, the Wall Street trade association that has been spearheading the campaign against eminent domain.

Sifma and its allies have lobbied Congress to obstruct lending in any area where mortgages are vulnerable to government condemnation and have urged support for a bill from Representative Jeb Hensarling, a Texas Republican who is chairman of the House Financial Services Committee, that would bar any federal guarantee for such loans.

After Richmond voted to pursue eminent domain, Sifma officials flew out to meet with city officials, providing them with a thick binder of analysis and research reports warning of potential negative consequences. Then these officials went a step further, said Bill Lindsay, the city manager, by placing a phone call to the city’s bond underwriter and complaining that the disclosure language in a coming offering — to refinance some old economic development bonds — did not adequately disclose the legal risks of the mortgage plan.

Cheryl Crispen, a spokeswoman for Sifma, said the call was routine. “Sifma staff regularly inquire with underwriters to understand market trends, and did so to better understand the impact the threat of taking mortgages was having on the offering and consequently the municipal bond market more broadly,” she said. The underwriter, RBC Capital Markets, concurred that Sifma did not try to interfere in the offering, which was halted when there was no interest from investors.

But Mr. Lindsay said all the attention was unusual. “I’ve handled 40 different bond issuances,” he said. “I never even heard of Sifma before this.”

In 2002, the Georgia Legislature passed the toughest predatory-lending law in the country. Hailed as a victory for consumers, it was intended to prevent abusive practices like steering customers to high-interest loans. Lenders immediately started trying to dismantle the law, warning that the “good guys” would no longer make loans to people with poor credit.

Some lenders did pull out of the state, and two of the three ratings agencies said they could no longer rate Georgia loans for resale to investors because they could be sued under the law. The state banking commissioner estimated that the mortgage market shrank by 15 percent. The following year, after a nasty fight, lawmakers gutted the statute.

Sifma officials point to this affair as proof that messing with housing finance can have ruinous effects. But it is an example that offers other lessons, too.

The loans that disappeared from the market after the law was passed were the same kinds of subprime loans that set off the foreclosure wave; conventional 30-year mortgages were not affected. The lenders whose departure was met with such alarm included Countrywide Financial, whose practices during the housing boom have cost billions in legal settlements.

In an article in   The Atlanta Journal-Constitution, experts concluded that had the law stayed intact, the housing crisis would have been less dire in the state, which became one of the hardest-hit. The article even implied that the whole country might have fared better, because “the Georgia drama also stemmed a tide of similar laws that were being considered in other states.”

Richmond has not yet tried to use eminent domain. The City Council must vote again before that happens. But the beating the city is taking from financial institutions makes the idea less likely to catch on in places like Irvington, N.J., and El Monte, Calif., which have expressed interest.

Richmond’s mayor says she has always known it would be a slog. “I’m not trying to minimize what we’re dealing with; it’s just like, if you’re willing to buck up against an unjust set of circumstances, you’re going to have those attacks coming at you,” Ms. McLaughlin said. “And in some sense that says you’re doing your job.”

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New York City Council Member Carlos Menchaca loves to grow spices and chilies to add to his home cooked meals — but when it comes to choosing his favorite Mexican food spot in Sunset Park, he doesn’t play favorites.

“That’s a hard one,” Menchaca chuckled. “I always order tacos al pastor with a side of Mexican rice and beans,” he said of his traditional go-to dish. It binds him to his Mexican roots and the vibrant immigrant community that has adopted him as their hometown hero.

“What I love about Sunset Park is that anywhere you go, Bush Terminal Park, the senior center, down 5th Avenue, or even 8th Avenue, you feel at home,” Menchaca, who also represents Red Hook, parts of Bensonhurst and Borough Park, told the Sunset Park Voice. “It’s a neighborhood of families.”

A large majority of those Sunset Park families hail from the neighborhood’s Mexican and Asian immigrant communities — the two largest ethnic groups in New York City, after Dominicans, according to Census data — which stood firmly behind Menchaca during his 2013 run for District 38 council member.

Menchaca made history as the first Mexican-American Democrat elected to serve in the New York City Council. His victory over an incumbent councilwoman signified the rise of Mexican Americans in the political landscape, putting the young trailblazer on the map.

“We grew as a family. They took care of me and I took care of them,” Menchaca said of his constituents.

The 35-year-old Manchaca already knew he wanted to go into politics while growing up in the border town of El Paso, Texas, described himself as a “feisty kid, wanting to know everything” to advocate for his family.

He witnessed his single mother, Magdalena, struggle to raise seven children on her own.

“I don’t know how she did it,” Menchaca said of the hardships the family faced. “We interacted with government all the time, and it made me passionate about understanding how the system could be better.”

The first in his family to graduate from college, Menchaca holds a degree from the University of San Francisco in performing arts and social justice. His experience in political activism led him to New York to join the Coro Fellows Program – where he learned the value of community-government relations.

Since then, he’s made it his mission to bridge communities and as a council member he introduced participatory budgeting in Sunset Park – a democratic process that allows residents to decide how to spend a public budget and where taxpayers dollars go to fund their neighborhoods.

Menchaca’s success at empowering disenfranchised communities through the initiative has garnered write-ups in The New York Times, DNAInfo, and the Brooklyn Daily Eagle. In his first year of PB, two-thirds of the ballots in his district were cast in Spanish and Chinese.

“Whether you live or work here, your voice matters, and what we’ve been able to do through participatory budgeting is bring opportunities to invite everyone to the table no matter their age, sexual orientation, or immigration status,” Menchaca said.

As Chair of the Committee on Immigration and member of the LGBT Caucus, Menchaca sponsored the 2015 launch of IDNYC, a municipal identification card offered to New Yorkers and undocumented immigrants. It gave them an opportunity to have legal identification without fears of deportation, open a bank account, access to public places, among other benefits.

But Menchaca was just getting started.

His next mission: Invest in adult education to help immigrant New Yorkers learn English. Menchaca says he receives daily letters at his legislative office from non-English speaking parents requesting for classes to help them communicate with their children’s teachers.

That’s why he’s advocating for $16 million and calling on Mayor Bill de Blasio to fund the Adult Literacy Initiative they way he did with universal pre-kindergarten. A recent report by the Center for Popular Democracy and Make the Road New York suggests that these classes could raise immigrants’ wages and reduce income inequality in impoverished communities.

“This is where it gets serious,” Menchaca said. “We think about gentrification and all the things that make us so afraid, because we don’t know what it is. But one thing that’s clear is how we can affect family’s lives through education.”

As our conversation steered towards immigration reform and the importance of ethnic and community media, Menchaca’s calm demeanor turned sympathetic. The 102-year-old El Diario/La Presna, the nation’s oldest Spanish language newspaper, laid off nearly half of its staff due to budget cuts, which shocked its readers, including Menchaca.

“The second I heard those real issues of El Diario, I called for a public hearing,” he said. He calls ethnic and community media a lifeline to many people in the city because it connects them to job postings, news, and immigration issues vital to families.

An hour before the hearing, Mayor Bill de Blasio and City Council Speaker Melissa Mark-Viverito announced, via press release, an expansion of the administrations outreach to community and ethnic media companies across the city. In addition, the city created an online directory of 200 media ethnic media outlets, that will be available to city agencies and the city vowed to place more advertising in the ethnic papers.

Aside from the legal and education proposals, gentrification is another issue Menchaca’s community knows all too well. People have seen the factory district west of the Gowanus Expressway redeveloped as Industry City, a home for trendy shops, hip cafes, and markets like the Brooklyn Flea and Smorgasburg aimed at food fanatics.

In February, when the mayor proposed the BQX Connector, a streetcar line that would link Sunset Park to Astoria, Queens, some residents feared this new development would accelerate gentrification in their waterfront neighborhood, but the councilman says it can also ease transportation woes in his district.

“We are in desperate need of transportation options and I think the BQX serves as one idea we need to explore,” Menchaca said. “We want to increase the ability for people to travel outside the neighborhood for jobs.”

People have been vocal on fixing the R trains, the extension of bus lines, potentially bringing Citi bike and the ferry into their communities. For now, Menchaca sees the BXQ as an economic development to help community members, but it will only happen if people work together, he noted.

Menchaca confirmed that he plans to embark on a City Council re-election campaign in 2017.

What will his campaign be about? Preserving manufacturing jobs in Sunset Park, protecting immigrants through legal services, and shaping how the police force works with the community, he said.

“No matter the immigration status, you help everybody, and when you do that, you get these beautiful communities that are so diverse,” said Menchaca.

Clarification [June 2, 10am]: An earlier version of the headline misleadingly referred to the councilman as Sunset Park’s hometown hero, although he was not born in New York. We’ve adjusted the headline accordingly.

BY ELIZABETH ELIZALDE

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