Teachers Union Demands Probe of Predatory Big Banks Loans That Made Chicago Schools 'Broke on Purpose'

The Chicago Teachers Union on Wednesday demanded a state investigation into a series of loan deals made with "predatory" Wall Street banks under ex-Mayor Rahm Emanuel and former Illinois Gov. Bruce Rauner that left the city's school system "broke on purpose."

"For years, banks scammed [Chicago Public Schools] with predatory financial deals, taking money out of our classrooms and shortchanging our students," CTU detailed in an online contract update. "For years, CPS and many other Illinois school districts have been systematically underfunded, burdened by bad bank deals, and forced to do more with less. We will need leadership from every level of government to transform our schools with the resources they deserve."

According to the Chicago Sun-Times: "During the financial crisis, stemming from the budget stalemate under... Rauner, from 2016 to 2018, CPS took out six high-interest loans. Just on these loans, CPS must pay $194 million this year."

CTU's letter to Illinois Attorney General Kwame Raoul requesting a probe says that "the predatory loans CPS took on were at sky-high interest rates unheard of for municipalities and public bodies, especially at a time when interest rates were at record lows."

As the union—now in bargaining talks with the city over a new contract—said in a statement about the request:

In other instances of predatory banking, state and local officials sought remedy through class-action lawsuits and other legal efforts to recoup funds, address the harm, and defend the public. However, in Chicago, the school district is still paying $200 million per year to lending institutions for loans that JPMorgan Chase, among others, sold and earned 9.5% profit or $110 million in the first year alone.

The CTU points to multiple historic examples of public officials upholding their responsibility to defend the public from such practices and is calling on current elected officials to fulfill the same obligation.

CTU Local1 president Stacy Davis Gates stressed Wednesday that "it is not that Chicago Public Schools does not have the funds. It's that Rahm Emanuel sold the school district to Jamie Dimon, JPMorgan Chase, and other bankers and left it broke on purpose."

"Our elected officials have the responsibility to investigate those predatory bank deals, just as they did successfully in the wake of the subprime mortgage crisis, and recoup the hundreds of millions of taxpayer dollars that the banks stole from the public and our children," she asserted.

The union is arguing that Democratic Illinois Gov. JB Pritzker, the Chicago Board of Education, and city officials including Treasurer Melissa Conyears-Ervin and Mayor Brandon Johnson, a former CTU organizer, "must all play a role in helping fund our schools and undoing the damage from the Rahm and Rauner years of predatory bank deals, and the decades of inadequate state funding."

CTU held a Wednesday morning press conference, during which Saqib Bhatti, co-founder and executive director of the Action Center on Race & the Economy, said that "we're here at Chase today because Chase took a bunch of money that belongs to our kids."

"CPS is [in] dire financial straights right now, and one of the big reasons is because banks like JPMorgan Chase and Bank of America systematically ripped off CPS for years and years and years," Bhatti continued, surrounded by people holding signs with messages including "Chase Profits Off Students" and "Bad Bank Deals Cost CPS."

"We know during the subprime crisis that banks were selling predatory loans to Black and brown families, loans that were designed to fail," he explained. "They did the same thing with CPS."

CTU also invited Bhatti to speak during Tuesday's public bargaining session at Morgan Park High School—the third event of its kind since the union began negotiating with CPS in April, before the teachers contract expired on June 30.

The Chicago Board of Education passed a $9.9 billion budget last month. As Chalkbeatnoted at the time, it features "cuts to central staff and administrative costs to help close a roughly half-billion-dollar deficit," and doesn't account for increases to teacher salaries, due to ongoing talks. Both Johnson and the union opposed staff layoffs.

CPS claimed during the Tuesday event that the additional cost from just 52 of over 700 CTU contract proposals would increase the district's projected deficit for fiscal year 2026 from $509 million to $2.9 billion, and by fiscal year 2029 it would hit $4 billion.

As the Sun-Times reported:

The CTU's bargaining presentation for Tuesday's session did not ask the district to take out a loan, but it challenged officials' financial analysis and claims that they lack funding.

The union pointed to revenue initiatives that the city and state could explore, like more heavily taxing millionaires and corporations—which would require changes to state law—or seeking federal funding for school building improvements. The union also suggested efforts that could take years and would not solve the budget problems in the short term, like fighting banks for past "predatory" loans to CPS or seeking money back from past "bad vendor contracts."

"These predatory deals are costing hundreds of millions a year," said Pavlyn Jankov, research manager for the CTU. "The district has to make every effort to claw back those funds."

The newspaper noted that CPS chief financial officer Miroslava Mejia Krug "revealed that the school district is actually a part of some national lawsuits against banks, but it is unclear whether those lawsuits specifically address high-interest loans."