walter russell mead peter berger lilia shevtsova adam garfinkle andrew a. michta
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Published on: March 15, 2013
Detroit Dems Enrich Wall Street As City Goes Bust

Michigan made it official this week: Detroit can no longer survive without adult supervision. Michigan’s governor named Kevyn Orr, a DC bankruptcy lawyer, to handle the city’s affairs on an emergency basis as the deep blue city makes a last ditch effort to avoid the biggest municipal bankruptcy in American history. During the long grim […]

Michigan made it official this week: Detroit can no longer survive without adult supervision. Michigan’s governor named Kevyn Orr, a DC bankruptcy lawyer, to handle the city’s affairs on an emergency basis as the deep blue city makes a last ditch effort to avoid the biggest municipal bankruptcy in American history.

During the long grim slide, much of Detroit’s population fled the implosion; those who remained suffered through declining city services. Schools, police, fire, infrastructure: all the vital services cities are supposed to provide have gone into steep decline.

But while the city’s mostly low-income and mostly African-American residents struggled to survive civic decline, the ill wind from Detroit blew somebody good: well connected Wall Street firms have feasted on the Motor City’s carcass.

Ever since the long death spiral began, Detroit has relied on periodic bond sales to keep its bills paid. The thinking was clear: borrow now, pay it back later when the city’s finances recover. Of course, Detroit’s finances never recovered, and now it’s on the hook for much of this borrowing, in addition to the fees that these banks charged.

And these are serious fees. Bloomberg reports that since 2005, Wall Street banks have charged the city a whopping $474 million. As a comparison, that’s about as much as the city’s current entire police and fire budget for this year:

“The banks promise to get you the money and say you can pay later,” said Greg Bowens, spokesman for Stand Up For Democracy, a Lansing group that campaigned last year to repeal the law allowing appointment of a financial manager. “They get their fees off the top, and you trust that they’re doing what’s in your taxpayers’ best interest.”

As Detroit is learning now, in many cases they weren’t. And Detroit is not alone: In city after city, struggling pension funds have turned to exotic Wall Street investments claiming high returns and minimal risks. In some cases this is working out, in many more it isn’t, but either way, Wall Street is collecting its fees and leaving taxpayers and pensioners to pick up the pieces when it falls apart.

Democrats are shocked, shocked by the news that there is gambling going on in America’s blue cities. They do their best to avert their eyes from the close political ties between corrupt urban political machines and exploitative Wall Street banks. In the lame progressive mindset that characterizes these decadent times, Wall Street is bad, and urban politicians are good. There can’t possibly be some sort of symbiotic relationship between them. How could something so good, so honest, so dedicated to serving the poor as the Detroit Democratic machine be engaged in a vicious conspiracy with Wall Street to bleed the poor and suck the city dry?

Some Democrats don’t like this kind of talk because they are cynical and others don’t like it because they are naive. The cynics are either in the game themselves or knowingly agree to look the other way because they value the support of political allies and don’t care how much those allies bleed the poor. The naive ones, and there are lots of starry eyed intellectuals in this country who don’t know a hawk from a handsaw, think that because many of these urban thugs are African-American, and because they advocate for more government programs to help the poor, they must obviously be sincere and be part of a general wave of good progressive people fighting to make this world a better place. Surely nobody is so cynical as to lobby for government programs because they plan to cream off the money?

Others have an uneasy sense that something is amiss, but a combination of historical ignorance and race sensitivity strikes them dumb. They look around America and see a number of urban areas with predominantly African-American populations. They see that many (not all) of these cities are run by incompetent, race-baiting hacks and criminals who use identity politics to bond themselves to the voters they exploit.

Because they don’t understand that corruption and identity politics have been the hallmark of American municipal government since the 1830s and 184os, they think the ghastly spectacle of demagogic corruption ruining our cities today is somehow a racial phenomenon. The racists among us see that picture and want to draw racist conclusions about African-American capacity for self governance; most of the rest of us are made so uncomfortable by the whole topic that we let the subject slide.

But thieves like the despicable Kwame Kilpatrick in Detroit are anything but a racial phenomenon. There were Irish, Jewish, Italian, Polish and Greek Kilpatricks in their day. We can confidently expect a wave of Latino Kilpatricks as Latino voting power pushes African-American machines aside in more urban areas.

And there’s another thing American history teaches: unscrupulous politicians will find unscrupulous bankers who will float them abusive loans in exchange for fat fees.

If our so-called ‘progressives’ today weren’t so intellectually decadent and, well, historically challenged, they would be leading the charge to clean up American cities. Instead they are mostly silent — and sometimes even defend the machines.

It’s a terrible shame because reformers and progressives really can fight the rot and help the poor — if they can get past their messed up ‘political correctness’ illusions long enough to recognize the basic facts of the case. Some people are trying. Politicians like (one hopes) Cory Booker are part of the wave of renewal and change that slowly and bit by bit can make a change. Courageous prosecutors, crusading attorneys-general, fiercely determined governors are part of the solution. And so are presidents who believe that their oath of office obliges them to attack with special force and determination the organized political machines that use a whole series of corrupt and collusive procedures to deprive American citizens of their right to a republican form of government.

Meanwhile, back in Detroit, Governor Snyder’s choice of Kevyn Orr to take the reins in Detroit is looking good. For one thing, Orr has a history of turning around failing organizations in Michigan. He was partially responsible for guiding Chrysler through bankruptcy in 2009. Given that many expect Detroit to enter bankruptcy as well, Orr’s skill set in this area is likely to come in handy. But perhaps most importantly, Orr, along with 82 percent of Detroit’s population, is black.

The mix of political machines, unscrupulous bosses and low income voters is not inherently a racial issue, but Detroit’s problems can’t be separated from racial concerns. Ever since the state of emergency was announced, many in Detroit have been concerned that the emergency manager law is effectively taking control away from the city’s black population and putting it in the hands of a manager appointed by a white Republican governor.

Michigan has a real mess on its hands. As Bloomberg notes, Detroit now joins Flint, Benton Harbor, Pontiac and a few other, smaller cities under emergency management. These cities account for nearly 50 percent of the state’s black population, so that almost half the black people in Michigan now live in places where local government has effectively lost power. In Benton Harbor in particular, the current situation has sparked racial concern:

“If I’m a young, African-American person growing up in Detroit or Benton Harbor or one of these mostly black areas, what is the message that sends?” Pilgrim said. “It certainly looks like the message is that people that look like you can’t govern.” […]

“I don’t see how it couldn’t be racially motivated,” Williams, 30, said of the law. “We will stop this because of folks who stood before us, like Medgar Evers, who fought for voting rights.” 

It’s true that the emergency manager law is taking power away from Detroiters and other Michigan urbanites, and we certainly hope that the state can return control to the people as soon as possible. But despite the fears of a hostile outside takeover, most of Detroit’s problems come from the corrupt political machine that has been looting the city for decades — and from the indifferent state and national prosecutors and politicians who failed to address the lawless state of city government and left the city’s poor to the mercies of heartless thugs.

Following in the footsteps of cheap foreign demagogues like Robert Mugabe, Kwame Kilpatrick and others of his ilk have played relentlessly on identity politics to earn support from poor, minority communities while using the power of their office to funnel money out of these same communities and into their own pockets. And while Kilpatrick—who was just convicted of 24 charges of corruption—may be the worst of the lot, he was far from alone.

What they have left behind is a city where taxes are among the highest in the nation, yet which can’t afford to pay its pensions, provide adequate police service, or keep the lights on.

The best way to stop future tragedies like this is to enforce the law. From voting fraud to corrupt relations with contractors and financiers to fraudulent accounting on pensions, many American cities are being run more like criminal conspiracies than anything else. And the cost isn’t just the money the politicians steal, or the inflated profits that those doing business with a crooked city can earn or even the sweetheart deals with public sector unions who function as part of the machine. It is the shambolic education offered to generations of poor kids, the lack of protection for person and property, the burden of a government that is both costly and ineffective and the enterprises and jobs such a government kills or drives away: corrupt big city machines may be the most important single civil rights issue in America today.

This is not, repeat not, a black thing. Historically, most of America’s worst urban machines have been white criminal enterprises. Often in American history, a combination of identity politics, fear and hopes of getting scraps from the machine have prevented poor people in the cities from organizing against their criminal masters. In the past it was often progressives and middle class reformers, some of the same ethnicity as most of the victims, others from different groups, who banded together to drive out the crooks. The criminals did their best to smear the reformers and identity politics was part of their shtick. Tammany Hall accused its critics of being anti-Catholic or anti-Irish bigots. Prosecutors who attacked the mafia were called anti-Italian. And so it goes.

Urban machines have a legitimate place in American politics. New waves of immigrants into urban America — whether from Europe, Asia, Latin America or the rural South — benefit from organizing to protect their economic and political issues. The machines allow them to assert themselves, claim a share of city patronage and business, and direct city resources to communities that might otherwise be overlooked.

But unchecked and uncontrolled, these machines have a tendency to go over the line. Graft proliferates; crony appointments degrade the quality of governance to the point that city administration is no longer able to function. This is where the reformers come in, pushing back against the tendency of political machines to jump the shark, imposing some limits and discipline on what goes on. Partly because today’s progressives are moral cowards who have allowed themselves to be shamed by the race card, this process of balance and reform didn’t really get underway in Detroit (and perhaps elsewhere) until enormous damage had already been done.

By overlooking the corruption and a mafia thinly disguised as a political party for so long, the authorities of the United States deprived the citizens of Detroit of the equal protection of the law. That must not happen in our other cities; municipal government in this country needs to be much more transparent, and law enforcement really needs to crack down.

Without this, all the federal block grants or social programs in the world will not help those trapped in the inner cities escape poverty and get the education and skills they need to build the kind of future all Americans want.

This is the pre-eminent civil rights problem of our day and is devastating minority communities throughout the country. Our political establishment, our university faculties and fashionable intellectuals, our newspaper editorialists, our legal profession and our clergy stand essentially silent; it is the silence of shame.


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