Amisha Patel: Banks soak CPS as schools close
Read the Op-Ed at the Chicago Sun-Times website.
BY AMISHA PATEL April 3, 2013 5:02PM
Last month, the Chicago Board of Education announced it would close 54 schools, affecting 30,000 children, mostly in low-income, African-American neighborhoods on the city’s South and West sides.
Mayor Rahm Emanuel and Chicago Public Schools board members want us to believe that they must close schools to save money, but that is simply not true. They are choosing to close schools while sending millions of dollars to Wall Street.
Every year, CPS pays approximately $36 million in toxically high interest rates, linked to so-called swap contracts, to banks like Bank of America and Goldman Sachs. These arrangements, in which CPS pays a fixed interest rate to the banks — typically between 3.5 and 5.25 percent — to protect itself against fluctuating interest rates in the bond market, were supposed to save CPS money.
But the arrangements backfired — and became morally reprehensible — when the banks crashed the economy and the Federal Reserve slashed interest rates to bail them out. Now the banks are profiting greatly from the federal bailout, but Chicago’s schools get nothing — no such relief for them from crippling high interest rates — even as the banks continue to extract millions of dollars from CPS.
Big banks were saved by public money, but many Chicago communities are besieged by record high unemployment and foreclosure rates. After jeopardizing our jobs and our homes, now these banks are coming for our children’s schools. We need a mayor who will stand up to Wall Street and fight for our communities.
But rather than demanding that these banks renegotiate the swap deals, as other cities successfully have done, Emanuel is choosing to close 54 schools. CPS claims the closures will save an average of $60 million a year for 10 years — numbers that many studies have shown are based on unrealistic assumptions, such as the district being able to sell 50 percent of shuttered schools. At the same time, CPS fails to account for the cost to the children who must cross new gang lines to get to school, the disruption of their stability and the creation of even more vacant buildings.
Renegotiating these swaps could save CPS tens of millions of dollars every year — money that could keep schools open. But that would mean putting the interests of poor, black children ahead of the banks, a difficult move for a mayor whose top campaign contributors come from the financial services industry.
Emanuel and his predecessor, Mayor Richard M. Daley, have systematically drained the city’s poorest neighborhoods of millions of dollars through tax-increment financing schemes. Emanuel secured tax breaks for the Chicago Mercantile Exchange — Chicago’s most profitable company — while balancing the city’s budget on the backs of low-income communities. And now he is closing schools to pay Wall Street banks $36 million a year.
Mayor Emanuel and the school board must demand that big banks renegotiate these toxic interest rate swaps, invest in our children, and keep our schools open.
Amisha Patel is executive director of Grassroots Collaborative, a coalition of community and labor groups fighting for economic and racial justice.
