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America's banks
did their best to trash this city. Once-proud neighbourhoods destroyed
by predatory lending. Everybody's gone,
I'm the old lady on the street now. What do you think of
the Wall Street bankers who did this? Is this a family show? If it's a family show, I can't
tell you what I really think. You might think
the lessons would be learned. But believe it or not, the zombies from Wall Street
are back and wreaking havoc again.

# Theme music

# THE PRETENDERS: My City Was Gone

# I went back to Ohio # But my city was gone... # Cleveland, Ohio,
was once the powerhouse of America. Its iron and steel
built the railroads and John D Rockefeller
made his fortune here. But its old 'rust belt' industries
have long been in decline and in recent years, it's been hit
by the curse of sub-prime lending. # My city had been pulled down... #

When I was last here
for the ABC's Four Corners, Wall Street's big banks were
forcing people from their homes and ruining lives. But with America now booming again, surely this once great city
must also be bouncing back?

This is Cleveland's East 4th Street. And when I was last here
eight years ago, in 2007, it was almost deserted. There were no glitzy bars,
no fancy restaurants, the Global Financial Crisis
was brewing and thousands of people
had lost their homes as predatory lending
ripped through the city. I wanted to come back and see
how they were weathering the storm and I must say,
here it looks pretty good. (Cheering and applause)

The big news in Cleveland is
that America's basketball superstar, LeBron James, is back in town. The man who recently landed a world
record deal with Nike has come home, and his Cavaliers
are top of the league. (Whooping and applause)

And it's not just in sport
the city is winning again. In July, the Republican Party
will roll into town and Cleveland will be centre-stage. to choose a presidential candidate and Cleveland will be centre-stage. But don't be fooled. It's not all bright lights. (Muffled police radio chatter)

On Cleveland's east side, where police
from the 4th District patrol, 60% of the population
is African American and almost everyone is poor. Here you can see the wreckage,
with abandoned homes everywhere. What do we have here? Looks like we have three bullet
holes Looks abandoned so we're going to
go in and check it out, make sure nobody's inside.

The family that lived in this house was blown away
by a wind from Wall Street, blasted out by a high-priced mortgage
they couldn't afford.

Thousands of others have also been
evicted or forced to walk away, leaving empty hulks to blight
the lives of those who remain. There's human faeces
on the wall over here. More alcohol. Over here on the floor, in the
corner, someone's syringe stash. A couple of needles there.
Somebody's probably living here. Syringes there.
Pill bottle. Bullet hole in the wall.
Bullet hole? Really? Another bullet hole there. Another one up there.
Another one here. Syringes all over the place,
so just be careful. We're getting a lot
of drug complaints in this area. Lot of dealing outside
and stuff like that. Prostitution. But unless the community calls, we don't always know
what house people are going in. (Siren blares) This area of Cleveland
with its big wooden houses has the highest crime rate in Ohio. And as Police Chief Brandon Kutz
explains, it covers all the bad stuff. Rapes, robberies, burglaries.
All the nasty ones, unfortunately. And we've had a lot of homicides
this year, a lot of people shot, we've had a lot of citizens
afraid and scared. It's a serious issue. NEWSREEL: Cleveland's downtown
traffic pours its streaming tides through well-planned
modern thoroughfares. The teeming life
of this Ohio big town reflecting its steady growth
and prosperity. Those grand old timber houses
on Cleveland's east side were built for immigrants who flocked
to the city from Poland and Germany in the late 19th century
to work the steel mills. More recently,
Ford and General Motors workers raised their families there. But all those high-paid jobs
have gone, whites have fled to the suburbs, and the scourge of sub-prime lending
has done the rest. NEWSREEL: ..and here
the fun's in full swing!

So this is East 119th Street,
off a street called Kinsman Avenue, and this is
one of the neighbourhoods where they were
very heavily involved in predatory lending and flipping. And as you can see,
there's vacant lots. You can begin to see vacant lots
regularly. Jim Rokakis has spent almost
four decades fighting for Cleveland, and at times, it must seem
like a battle that can't be won. Vacant lots,
like broken teeth on a smile. Look, broken windows and boarded up. Everything falling apart.
Vacant lot again. Vacant lot again. It's a shocker, this street,
isn't it? There's an occasional outlier... Back in the '80s, Rokakis was
Cleveland's youngest-ever councillor. In the '90s and '00s
he was County Treasurer. And he now runs
the Thriving Communities Institute. But not much is thriving
in this part of town. These houses
have virtually no value. So even if you owned one of these
and it was occupied and you wanted to sell it,
who would buy one of these? Would you buy a house - would
you buy that house next to that lot? Across from this lot?
Across from all these boarded homes? Why would you buy one of these? If you bought one of these,
what would it cost you? Oh, you could get a board-up for... probably from the County Land Bank
for nothing. The only cost
is you'd have to repair the house.

You might have plenty of work to do and you'd certainly
have plenty of choice. A wave of foreclosures
in the last ten years has left 20,000 houses vacant. And as the owners have moved out,
the vandals have moved in. So this was a classic Cleveland
duplex or a Cleveland double. This is the upstairs unit. This was the kitchen. The old saying, everything is gone
including the kitchen sink. The sink is gone,
the cabinets are gone, the light fixtures have been taken. So this is the living room. As you can see,
the damage here is extensive. They've left the window frames. I'm surprised that aluminium
window frame is still there. Usually they get those
and take them as well.

Just a decade ago, the median sale price
in East Cleveland was $75,000, but derelict houses and vacant lots
make everything worth less. And now it's $15,000 -
if you can find a buyer and if you haven't already
walked away, as so many have done. About 25 houses are empty
on this street. And how's it got like that? Well, people are dying and people
are just abandoning the homes. They can't afford the homes
and the upkeep of the homes. A couple of fires on the street. They left the homes
and never came back.

Stephanie Benifield has lived
on East 117th Street all her life, and all her wealth
was tied up in her house. But it's now worth
less than she owes the bank. So her savings have vanished. She keeps on paying the mortgage because she runs a daycare business
from home, and her family
is just across the road. But few others can see the point
of sticking it out. Everybody's gone.
I'm the old lady on the street now. Everybody's gone. So... Anddoesthatmakeyousad?
Sure it does. Some of the older neighbours
stop by every now and then and all they can do
is shake their head. This street sure went down. It's been in a constant state
of deterioration.

It's been in a constant state
of deterioration. Last time I was in Cleveland,
I met with Barbara Anderson and we walked down this street
together. Today, it has even more empty blocks
and crumbling homes but like Stephanie,
Barbara is staying put. When I was last here, in 2007, yousaid,'Ithinkwe'rehalfway
throughthestorm.'Yes. Was that too optimistic,
do you think? It was way too optimistic.
Waytoooptimistic? Because even now
we're not halfway through the storm. So more people have moved away? And they're going to continue
to move away. What about your house? You owe more on your house
than it's worth. Why don't you walk away too?
Why do you keep paying the mortgage? Financially,
it can be considered a burden but emotionally,
it's an uplift and it is a pleasure. I raised eight kids here. They were raised well,
they are doing well... Fantastic.
..and I found my love here. But plenty who can leave Cleveland's
east side or quit the city have chosen to join the exodus. We lost 18% of our population
between 2000 and 2010. But what I think is even more tragic
is that hundreds of thousands, tens of thousands of home owners
in Cleveland had their single most-valuable asset
stripped of almost all its value. It's estimated in this country that the minority community,
African-American Hispanic, have taken a $1.2 trillion hit
between 2000 and 2010 to their net worth. Thatisahugeamountofmoney.
Sure. How are they coping with that?
What's the wash up of that? As best they can.
I mean, what can they do? # Cleveland, city of light,
city of magic # Cleveland, city of light,
you're calling me... # So how did it happen to a city
with such a glorious history? A city with its own
Federal Reserve Bank, a world-famous symphony orchestra and some of the best museums
in America or even the world? A city that in some parts
is also prospering and that offers good new jobs
to those with skills and education? Well, it's about change. And about the people America
is leaving behind. # Cleveland, city of light,
city of magic... # It's also about whites
fleeing to the suburbs and fear of crime. But what really killed
this community is reckless and fraudulent lending
by America's big banks.

Back in the early 2000s, the banks and mortgage companies
were so desperate to lend money they were pushing it out the door
to anyone that had a pulse. No job?
Not a problem. No income?
Who cares. And bad credit score?
Well, that didn't matter either. And to make sure no-one missed out, they were even prepared
to fiddle the paperwork, which is why they were collectively
known as liar loans. # JAZZ MUSIC

(Doorbell)
Mrs Johnson, good to see you again. This is Mike. You can trust him,
he looks just like you. African Americans and Hispanics
were targeted because many
had never been able to borrow before. Which is why the loans
were called 'sub-prime'. Here are your low monthly payments
and interest rate as we promised. Here's where they triple. The rest of this stuff, I don't
think a lawyer could read this. It protects us,
makes sure we get your home when you can't pay us back. So why on earth
do the banks lend money to people who can't pay it back? Because you got your money
on the front end. Because there were no consequences
to you, as a mortgage broker, for giving somebody a bad loan. So they did it because they could, because greed was in play
and 'cause there was no regulation.

The brokers who made the loans
sold them to Wall Street, where big banks like Goldman Sachs
and Lehman Brothers packaged them into what were grandly called
'mortgage-backed securities'. The ratings agencies then stamped
them Triple-A or safe as houses. And the parcel was then passed
to unsuspecting investors around the world.

The real villainy, really,
was at the Wall Street level. These are some of
the smartest people in the country. These are the people who'd been
making money for generations. They were bringing in product from
cities like Cleveland and Detroit and packaging it and selling it
to investors all over the world. They were too smart
to not have known but the profits were too good,
the bonuses were too huge and you had no less
than Alan Greenspan himself, the wizard at Wall Street,
who said nothing about this. So nobody was willing to speak out. What do you think of the Wall Street
bankers who did this? They're, they're con...
Is this a family show? If it's a family show, I can't
tell you what I really think. I think they're awful human beings and they don't care
and they got away with it. That's what you have to remember,
they got away with it. So no-one went to jail?
No-one went to jail. Any of those bonuses get returned?

Almost a decade later,
Cleveland is still paying the price and incredibly, the banks
are getting away with it again. As house values fall,
they're also abandoning these homes, leaving what are known
as zombie mortgages to live on and haunt owners
like Marty Quinones. How's it going?Good.
I'm Paul. Marty bought this house
21 years ago and set about making it his home. That used to be a window. I put a sliding door in,
stripping woodwork, put in new woodwork here. That's beautiful.
You stripped all the paint off this? Marty refinanced the house
to do it up. And although it was then worth
just $50,000, the bank encouraged him
to borrow $80,000... at 14%. I put a lot of work into this house.
Yeah, I can see. Chandelier.
Chandelier. This year, he lost his job
and fell behind with payments. The bank told him they were going
to repossess his home but then, unbeknown to him,
it decided not to, leaving a zombie mortgage
to haul him back. So what are you liable for, to
keep up the repair of this property? Correct, everything.
Even though you no longer live here? Correct.And even though
you haven't paid the mortgage? Correct, and even though
I don't have a job... Even though the bank's told you
to move out and you don't have a job? Yeah,
I became unemployed multiple times. I've been laid off or lost my job
six times in the past eight years. What sort of jobs? It was in banking,
doing loan servicing. I've been in collections. I've worked
a couple of restaurant jobs. I owned my own business for a while.
That closed. So what are you gonna do? My plan was just to walk away but, you know,
you can't walk away from the courts. So I was actually planning
on moving down to Florida and that's being postponed
due to the court. CLERK: Calling the case
of Martin Quinones with a property
at 1289 West 91st Street. Mr Stinger, good morning.
Mr Quinones, good morning. Good morning, sir.
Good morning, Your Honour. It looks as though the city has
filed a first degree misdemeanour. Marty is required
by Cleveland's building code to keep his house in good repair. And it's the Housing Court's job
to see that he does. But Judge Raymond Pianka
isn't just interested in that. He also wants to fix
that zombie mortgage by getting the bank
into court as well. There's been a discussion
to subpoena the bank who has not released the lien
nor taken the foreclosure through, is that right? They told me they were foreclosing. And then they said, 'Well, we didn't
actually file the foreclosure. We want you to sell
the property instead.' Let's see what we can do to make
the best of a bad situation and to move this property
to a beneficial owner. And you could even subpoena
the bank. What bank is it? Marty doesn't know the answer. The bank he borrowed from
onsold the loan to someone else. But whoever it turns out to be,
zombie mortgage cases like this are one of the Housing Court's
biggest problems. Thank you.
Thank you, judge. We regularly see in court owners who thought
they lost the property. They may have filed bankruptcy and their attorney told them,
'Well, you now have a fresh start. You can go on with your life.'

But the mortgage company
has to pick that mortgage up and foreclose on it. Well, they don't.
They don't want that property. So they just walk away
from the mortgage. It sounds like a God-awful mess? Well, I think it is a mess. And I guess if we had the view from
the balcony, we'd say it's a mess, but we just view things
address by address. And that's
how we're able to get along.

The Housing Court is usually able
to make the bank take the property or give it up
to the County Land Bank.

And the Land Bank can then
find someone to live in the house and repair it,
or, more likely, knock it down.

Between them,
Cleveland City and Cuyohoga County have demolished 11,000 houses
since 2007, and 10,000 more are in their sights -
if they can find the money.

I always find it somewhat
frightening, honestly, when I'm in front of one of these,
they scare me. People lived in this house
for 60, 70, 80 years and in 15 minutes, it's gone.

But while it may seem shocking,
it is inevitable. Cleveland's population is less
than half what it was 60 years ago. And taking down derelict houses
can be good for those who stay. As you can see,
they planted three trees and a few plants
here and there already. A couple of streets away, the house next to Stephanie's
has already been demolished and she is getting a new garden. So you're going to get this block
for free or nearly free? Nearly free.
Fantastic. They're gonna fence it in for me and my vision is a long picnic table
and a tent. I can see having a gazebo
over there. I want somewhere to play basketball. Andyougettoownthis?
Yeah, this is mine. It's actually gonna belong to you?
This'll be mine. And what do you have to pay for it? I don't know how much
it's gonna be a month, but it'll just be taxes
that I have to pay on it. That's great. They haven't informed me
of the price yet.

And in nearby Slavic Village, demolition is also bringing
green shoots to the community. So here, we had
about a dozen units of housing in a lot of different states
of distress. We tore the housing down and the
neighbours decided to get together and figure out what can we do
with the vacant land and as an interim use,
this is our lavender gardens. Councillor Tony Brancatelli is determined to get Cleveland's
east side blooming again. And while he's having some success, he could do so much better
if he got a little more help. Why doesn't the Federal Government
give you some money to clear this place up? What does it cost, $10 million
toclearthewholeofyourvillage? Yeah. We have another
thousand abandoned properties here that we're trying to weed out
and that is a $10 million price tag. That'speanuts!
Ah, that's... You can't get it? That's one set of landing gear
on a fighter plane. After two decades
battling for Cleveland, Tony Brancatelli
remains remarkably optimistic. But in his position
you certainly need to be, because the banks have left people
like him with a massive task. We're stuck holding the bag. We're the guy behind the elephant
cleaning up the mess and it's a big bucket
that we've gotta carry these days. So we get stuck
having to demolish properties, we get stuck having to clean them, we get stuck having to deal
with the social unrest. So how do you stop that? All these vacant properties,
some of them derelict, property values going down,
more people walk away, more vacant houses,
more derelict houses. How do you stop that cycle? Well, certainly, for us, we have to
be aggressive on demolition. We absolutely have to give
confidence back to the market. We're pushing very hard to knock
down every condemned house we have, which means we have to have
the Federal Government step up. We need more resources.
We can't do it on a local level. The legal term relative
to Sheriff's sale is 'caveat emptor' which means 'buyer beware'. But while Cleveland whistles
in the wind for the Feds to step in, the foreclosures keep coming. Every week, Cleveland's Sheriff
sells off properties from which families
have been evicted. And there are bargains to be had. Here you can buy a freestanding house
on Cleveland's east side for the price of a dog kennel. Sale number 2, case #837506. Minimum bid is $334.
Do I have a bid? But even at $334,
this house has simply no takers. Not sold for want of bid. Houses in better parts of the city
do sell and at slightly better prices. $12,500.
I have a bid of $12,500. Are there any other bids?
Are there any other bids? (Gavelstrikes)
Sold for $12,500! For around the cost
of a second-hand car, this man and his family
now own a home in the aptly named Hope Avenue. Gi tells me he'll take a year
to fix it up and then move in. Areyouexcited?
Oh yes, I am. My wife is going to be,
when I call her. She will really like the house.
It's a pretty good price. That's pretty good.
I won't have to pay no mortgage now. There are also foreclosure bargains
to be had on the internet.

There are also foreclosure bargains
to be had on the internet. And from the other side of the world, a few thousand dollars
for a house like this looks like a sure-fire way
of making a motza. We have people from China,
Saskatchewan, California, Hawaii who have never been
to Cleveland, Ohio, but it's just so easy
through the internet. We had, as a defendant,
a Coptic Bishop in Cairo. And... here's the address
of the owner in Moscow. Well, in Ohio there's Poland, Ohio,
and Warsaw, Ohio, and Moscow, Ohio. Here, it was Moscow, Russia.

So why do people in Cairo or Moscow
or China buy properties in Cleveland? Well, I think they hope that -
some of them - that a dead horse
may become a show horse and bring it back to life,
someone will want that property. And if they lose on some,
they lose on some. On others, they may make a profit. It's been empty now
for three years this past fall. But rarely does it end well
for these overseas buyers, or indeed for Cleveland. As Carol Black, who lives next to this crumbling home
in Slavic Village knows well. A gentleman that lives in England
owns the property. We found out because he came
knocking on the door one day. This house has been empty for
three years, its taxes aren't paid, and its owner seems to have given up
trying to save it. Do you know who's owned
this property over the years? So this is what we deal with. So it's a wholesaler
from out of the country who brought a number of properties and he bought it from another
investor called Viper Direct who was also a person who bought
wholesale properties, who - then it's, again,
the passing of the hot potato. And now you have a property manager
who absconds with the money, doesn't pay the bills and now
you have an abandoned property. And what are you going to do
about this house? You want to knock it down or what? I suspect the bulldozer is going to
be the end result of this property.

In 2007, he received the NeighborWorks America
Local Government Service Award, the Leadership
in Social Justice Award, from Greater Cleveland Community... No, I have to finish!
(Laughter) ..and many other awards.
(Laughter)

I bring you the vice president of the Western Reserve
Land Conservancy, Director of the Thriving Communities
Institute, my friend Jim Rokakis. (Applause) It was Jim Rokakis who set up
Cleveland's Housing Court 35 years ago. But as all those involved
gather for its birthday party, there's sadly not much to celebrate. A lot of us raised our voices
and we screamed and we waved and we said,
'There's a train wreck coming! There's a train wreck coming!' Well, the train wreck came. Judge Raymond Pianka is also here. So is Councillor Tony Brancatelli. And without their efforts, there's no doubt Cleveland would be
in even worse shape than it is. But while they're all ready
to keep battling on, Rokakis is the first to admit
they're not going to win. We're certainly putting up
a good fight, but we've already lost this war. I mean,
we have to be upfront about it. We had a chance in the late '90s
and early '00s to stop this out-of-control lending. We had a chance to impose rules and
regulations on the lending industry that would have prevented
this catastrophe from occurring and we failed. This was a war. We lost the war. And what we're doing now,
this clean-up, is basically burying the dead. # ROBERT EARL KEEN:
Goodbye Cleveland

# Goodbye, good luck and goodnight # Goodbye, good luck
and goodnight. #

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