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Laughing All The Way To The Bank: Chicago, The Chicago Tribune, Preferred Lenders, and – Racism?

April 12, 2007

For the past several months Washington Mutual bank has run a pretty funny tv commercial in the Chicago area. The spot’s premise is that “WaMu” is a forward-looking institution, not hidebound by old-school banking maxims and bad traditions. In highlighting this, the commercial features a bunch stereotypical, back-slapping, out-of-touch, cigar-chomping, greedy bankers on a WaMu-hosted talk show. The WaMu host forces the bankers to answer questions from “regular people,” and of course the fat cats come off as, well, what you would expect. [You can watch the commercial here.]

I was reminded of this commercial after reading a Chicago Tribune story this morning. Written by Jodi S. Cohen, a fine reporter whose stories I’ve cited here before, the article attempts to situate in Chicago the ongoing “preferred lender scandal” in higher education. As you may already know, this story has come up at History and Education twice in the past – first as a personal reflection, then as national news.

Today may be the scandal’s tipping point nationally. The topic is the focus at (two stories here and here). As with the Tribune, other major print media – the Washington Post and the New York Times – have picked up on the story. And of course the scandal is covered again at the New America Foundation’s Higher Ed Watch weblog. But NAF has been on this for a month or so.

Cohen’s story focused on the city’s very own Chicago State University, an almost all-black-school located on the South Side. Cohen informs the reader, in a “Tribune Exclusive,” that “Chicago State University steers students who need loans to a bank [Seaway National Bank] led by a university trustee and in which university President Elnora Daniel is a director and shareholder.”

There is more: “Daniel owns stock in the private, South Side bank and was appointed to its board of directors in 2004, according to state records. Since then, the bank has seen a nearly 200 percent increase in the number of federally guaranteed loans to Chicago State students, for a total of $1.5 million, according to a market research firm that collects data on federal loans. Chicago State trustee Jacoby Dickens, the politically connected chairman of Seaway’s board of directors, indicated in 2005 that he had a 52 percent ownership interest in the bank, according to state records.”

But Seaway is not just any bank. It “is the city’s largest African-American-owned bank, with $358 million in assets, according to its annual report. The company has seven branches and about 240 employees.” It “was established in 1965 by several local businessman at a time when banks on the South Side discriminated against African-Americans seeking loans. The founders started the bank by going door-to-door to sell shares until they raised $1 million, according to the company’s Web site.”

For those of you short on time and unfamiliar with the article, I’ll briefly resort to excerpts:

– “Since [2004], the bank has seen a nearly 200 percent increase in the number of federally guaranteed loans to Chicago State students, for a total of $1.5 million, according to a market research firm that collects data on federal loans.”
– “Seaway has been on the university’s list of preferred lenders since the 1990s, and it was temporarily removed in the spring and summer of 2005 because of student complaints about customer service.”
– “At Chicago State . . . the five recommended companies — Bank of America, JP Morgan Chase Bank, Citibank, Sallie Mae and Seaway National Bank — received 96 percent of the loan business from Chicago State students in fiscal year 2006.”
– “That year, Seaway bank held 420 loans for Chicago State students, up from 134 the previous year. Most other lenders saw their loan volume decrease at Chicago State during that time, according to Student Marketmeasure, a research firm based in Bethesda, Md. John Lee, a vice president at Student Marketmeasure, said Chicago State students were virtually the only students last year that used Seaway for federal student loans. ‘They are not a very big player,’ Lee said.”
– “Seaway President and Chief Executive Walter Grady said Wednesday that he did not think there was a conflict of interest in Chicago State officials being shareholders in the bank. ‘We have worked with Chicago State for many, many years, even before the president [Daniel] came,’ he said. He pointed out that of the nearly $27 million in federal loans held by Chicago State students last year, only 5.5 percent were made by Seaway.”

At best all of this is quite unseemly. At worst it may “violate the state’s ethics act and other statutes, said Gilbert Jimenez, the [Illinois] deputy inspector general for investigations.” In either case, it correlates with New York Attorney General Andrew Cuomo’s findings on preferred lender relationships in that state.

But Cuomo’s investigation unearthed unethical relationships at Columbia University. Officials in other states found unseemly preferred lender connections at the University of Texas and the University of Southern California.

This begs the question: Why didn’t the Tribune find anything with Chicago’s major, high-cost universities? What of the University of Chicago, DePaul, Loyola, Northwestern, and the University of Illinois?

This leads me back to the Tribune. It has a well-earned reputation of being friendly with big business. This dates, at least, to the paper’s ownership by Colonel Robert R. McCormick. Is it possible that the paper is sandbagging on the preferred lender story to protect business and university interests in Chicago?

And why pick on Chicago State? Why focus on an all-black school and that school’s relationship with an African-American owned bank? A graphic in the article showed that Seaway was ranked number 4, I believe, on a list of the top 5 lenders at Chicago State?

Is the Chicago Tribune exhibiting a racial bias in its story? I wonder. There was an accompanying story about preferred lender relationships at Western Illinois University in Macomb. But that story was clearly a brief aside to the “Exclusive” that focused on Chicago State University.

The are two major ironies in this story. First, the Chicago Tribune began as a Republican paper in the in 1840s. While it exhibited nativist, xenophobic tendencies, it also stood behind Abraham Lincoln in the Civil War and supported the abolitionist cause. More on the Tribune’s history can be found here. Based on its founding, there should be no paper in the Chicago area more empathetic or concerned with injustices toward African Americans.

This brings me to my next point. With its well-known, pro-business tendencies, you’d think that the Tribune would do everything in its power to expose the anti-competitive practices of local institutions, businesses or otherwise? Why is the Tribune suddenly falling down on the job with regard to the city’s major universities? Not a single other institution was mentioned in the piece as even being under investigation.

Let’s hope that future stories on this subject at least deal with Chicago’s older, historically-white institutions. Otherwise, those lenders and universities will be laughing all the way to the bank, just like the fat cats in the WaMu commercial. – TL


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