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The impossible bank: South Shore, a model mixture of capitalism and community development



In the beginning, Richard Taub recalls, it was just an idea passed to him over the backyard fence by his next-door neighbor.

Ronald Grzywinski, the neighbor, and several of his friends and colleagues--Milton Davis, Mary Houghton, Jim Fletcher, and Michael Bennett chief among them--had a vision: they were going to buy the South Shore Bank, and use it to rebuild housing, create jobs, and funnel desperately needed money into that mostly black south-side community.

Was he interested? Grzywinski asked. Of course, Taub replied. As a professor of social science and public policy at the University of Chicago, his job was to be interested in such ventures. Of course, he had his doubts--almost all the experts did. It seemed so quixotic, so 60s. At the very least, Taub figured, he could follow their progress, chart their ups and downs, and maybe, when it was over, write a book.

Well, that was in 1973; now, some 15 years later, Taub has indeed written that book (Community Capitalism, published by the Harvard Business School Press). The surprise, however, is that the experts were wrong, and the ending is a happy one.

South Shore's bankers have successfully wedded the best aspects of business and not-for-profit groups to create a model for inner-city development. The bank draws and distributes investment dollars from a wide variety of sources. One of its holding companies, City Lands Corporation, wheels and deals with downtown banks and investors to arrange for-profit housing and business deals. And finally, its not-for-profit subsidiary, the Neighborhood Institute, offers education and job-training programs, and oversees the development of housing co-ops for low-income residents.

All told, these bodies have supervised about $170 million in local development, constructed or rehabbed almost 1,000 units of housing, and provided jobs and training to hundreds of residents.

"I'm very glad that [Taub] wrote his book because it lays out the history for everyone to read," says Michael Bennett, a vice president of the bank. "There are many reasons why we have succeeded. One of the most important is that South Shore never bottomed out. We could create a model that built on the community's strength. Now the question is whether it will work in other areas."

To be sure, South Shore still has problems, particularly along its business strips where too many stores are vacant. About 15 percent of its residents live on an income below the poverty level, and its public schools are in poor shape.

"I see it as a community in transition," says Taub. "South Shore has made a lot of progress, but to be realistic, it can go either way, depending on forces largely outside of its control."

Because of the bank, however, South Shore will likely grow, assuming that with the coming of a new administration in Washington, the federal government regains its senses and starts investing in its cities again.

"Communities in the downward spiral can't rebound on their own," says Bennett. "They need outside resources. In South Shore, many of our big projects were funded by the state, feds, and local government. With this assistance, you can trigger private development. But you can't expect people to invest unless they see signs of improvement."

Taub's book begins in the early 70s, when South Shore was in the throes of wrenching changes. Whites were moving out of and blacks into the community, roughly bounded by 67th Street on the north, Lake Michigan on the east, 83rd Street on the south, and Stony Island Avenue on the west.

At first, most residents struggled to overcome the spread of fear and prejudice. Theirs had always been an ethnically diverse community of Jews, Catholics, and Protestants, many insisted. Unlike virtually any other community in Chicago, they would welcome racial integration.

"This kind of heterogeneous environment is the most suitable for learning how to get along in today's world," one resident told the Tribune in 1969. "Any other kind of environment is artificial, contrived, and unreal."

Of course, the real problem was not race, but economics. Many of the new black residents had pushed their way up from intolerable conditions in Woodlawn, Englewood, North Lawndale, and other impoverished south- and west-side communities. They didn't have the money to maintain their property, and their landlords had no incentive to do it for them. Why bother, if the tenants could not afford to cover the improvements in the form of higher rents?

First to decline were South Shore's large multifamily courtyard apartment units. Soon residents complained that the schools were overcrowded and unmanageable. The stately mansions in the northeast corner of the community (home to, among others, Jesse Jackson) remained vibrant. But the flight of middle-class residents (white and black) in the bungalows and two-flats on most side streets continued.

In Community Capitalism, Taub neatly relates this evolution with a series of telling statistics and anecdotes. It is, he says, the age-old saga of an inner-city community struggling against forces outside its control.

"One Sunday morning a 14-year-old black female standing at a bus stop . . . became bored and, to kill time, began hanging on the branch of a small tree close to the stop," Taub writes. "A short while later, an elderly black man and his wife passed by, presumably on their way to church. . . . Suddenly, the man turned, and confronting the youngster almost nose to nose, said: 'Young lady, why is it that everywhere we move turns to shit? I will tell you why. Because young and careless and destructive and stupid people like you destroy everything that is nice.'

"The story needs a little elaboration. An attractive neighborhood means a great deal to people who find it difficult to find one, to say nothing of keeping it that way. It is the fight of the respectable to maintain order in a world that does not provide it easily."

The killing blow might have come in 1972, when South Shore Bank, a long-standing neighborhood institution, announced plans to move to the Loop.

"The original owners were ready to move to a Randolph Street location, when they were opposed on two fronts," Taub says. "A fellow by the name of Bob Keeley, who was someone very active in the community, led opposition based on the fact that a move would really hurt South Shore. In addition, a downtown bank complained that a move would cut into their operation.

"The federal government has to approve a charter change that comes from moving a bank, and after public hearings they ruled against the move, citing, among other things, the needs of the community."

The ruling was a blessing. Putting together bank loans, investments from foundations and philanthropists, and some of their own money, Grzywinski and his allies bought the bank for $3.2 million. The idea was to "incorporate profit seeking and not-for-profit elements while committed to generating economic development," Taub writes.

All of the early players believed that South Shore had the ingredients--transportation, parks, proximity to the Loop and lake--for successful development. Most important, it had a market of middle- and working-class blacks (postal workers, schoolteachers, federal bureaucrats among them) interested in buying property there, so long as crime and decay were curbed.

If South Shore's bankers had a model, it was Lincoln Park. It too had been a community on the slide. And then, in the 1960s, the federal government financed the reconstruction of dozens of blocks. That investment cleared the way for thousands of private investors, large and small.

It seemed easy on paper; in reality it was a tough sell. The early efforts were marred, Taub's book explains, by mistakes and foolish investment decisions. On top of everything, the bankers had to reverse the attitudes of their potential customers.

"Even though systems improved, the bigger deposits did not come rolling in," Taub writes. "Officials developed a protective ideology. Black people, they said, like the prestige of brand names. They like the idea of having their accounts at a prestigious downtown bank."

Bank officials tried a myriad of approaches. "All you get downtown is prestige," ran one advertising line Taub quotes in his book. "In South Shore, you get personal service and investment in your neighborhood." Meanwhile, its officials were calling on philanthropists and downtown foundations to open savings, checking, and CD accounts at the bank.

The bank's staff evolved, as old-time employees gradually gave way to a new wave of bankers who were energetic, idealistic, and green.

"I was in graduate school before I came here," says Sara Lindholm, president of City Lands Corporation. "That was in 1977. Ron [Grzywinski] told me that there was a rapid turnover because the old guard was not comfortable with all the changes. It was an unbeatable challenge. They put me in the basement, so to speak, as a mortgage loan clerk. But I learned the business and was able to rise to the top."

It was obvious to everyone at the bank that success hinged on their ability to move beyond basic banking activities. In 1978, the bank and City Lands struck a deal with Rescorp, a consortium of savings and loans, and the First National Bank of Chicago to rehab about 300 units of housing. That paved the way for these same players to cook an even bigger deal: the Parkside Project.

"Parkside was a result of so many things coming together," says Bennett. "Rescorp had worked here already, and First National was then doing neighborhood projects."

All told, 441 units in 22 buildings were rehabbed in a massive effort that expended nearly $26 million.

"Putting together a deal like this means taking advantage of what everybody does best," says Bennett. "First National brings in money. City Lands is the construction partner and the community base liaison, and Rescorp was the manager, they did tenant screening. The government provides most of the money."

As it stands, almost all of the tenants in the Parkside buildings receive a federal subsidy to help pay their rent. This enables South Shore to retain and attract new working-class and middle-income residents.

"Projects like these encourage small investors to move in," says Bennett. "People see what's happening and they say 'Hey, this community is coming back.' So they come to the bank for a mortgage to buy one of the smaller multiunits, or a home. That gives the bank more money to invest in other efforts. It's all about bringing more dollars into the community."

Those early housing initiatives might have been easy compared to the difficult challenges still ahead.

"The big challenge is on the business strips," says Taub. "There are some good signs--Dominick's is moving to South Shore, for instance. But the negative forces are tough. How do you attract businesses to a street where there's no parking, where stores are small, and where there are guys standing on the corner making comments to females?

"People's shopping habits change. A lot of the people tell me 'You should have seen 71st Street years ago. It had every kind of store--furriers, upscale stores, everything.' That's probably true, but in those days 71st Street didn't have to compete with all the suburban malls."

"I'm hopeful," Bennett adds. "[Taub's] book shows there's nothing magical about this. It's hard work; it's not a very glamorous process.

"From a marketing standpoint, what you've got to do is accentuate the positive. Whatever that is. In South Shore, it's the location, the lake, people want to live here. On the west side, like in North Lawndale, it may be the availability of the industrial land. Whatever, you've got to get people interested. And then you need a dedicated core of people who are committed to the community. That's your cornerstone. Outside investment has its highs and lows, but the cornerstone remains."

Art accompanying story in printed newspaper (not available in this archive): photo/Bruce Powell.

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