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1976: Mike Wallace on Detroit corruption

1976: Mike Wallace on Detroit corruption
1976: Mike Wallace on Detroit corruption 13:48

How did Detroit's neighborhoods get so destroyed? Take a look at this 1976 report from the archives of 60 Minutes, and you'll see that the problems in Detroit's blighted housing stock are decades in the making.

Back in '76, Mike Wallace charged into homes all over Detroit for his story about the federal government's role in the city's deteriorating neighborhoods. "Hell Upon Detroit," Wallace's 60 Minutes report, aired on April 18, 1976, and it opens with an interview with a young Carl Levin, then president of the Detroit City Council (and now a U.S. senator).


The following is a transcript of "Hell Upon Detroit":

MIKE WALLACE: Our lead story tonight tells of good intentions gone wrong. Since Depression days, the FHA --the Federal Housing Administration-- has guaranteed mortgages for millions of American home-owners. Then in 1968, Congress broadened that program to include the very poor, so that a poor person could buy a home for as little as $200 down. That was fine with the mortgage bankers. They couldn't lose, so long as the FHA guaranteed the loan on a house.

What no one foresaw was a wave of corruption and mismanagement, and that thousands of homeowners would default on their monthly payments and stick Uncle Sam with the bill. Many of their houses, repossessed by the Government, are now dilapidated wrecks. The FHA is a division of HUD - the Department of Housing and Urban Development. But in one city, the city hardest hit by these homes, it stands for this: "Hell Upon Detroit." That title is not ours.

It was coined by the president of the City Council of Detroit. What you're looking at is the result of ten years of decay here in the center of Detroit. Looks as though maybe a bomb hit or a riot took place. There was no bomb; there was no riot. That's vandalism over there. In many neighborhoods, empty, boarded-up HUD homes have sat for months, sometimes for years, prey to fire, crime and vandalism. They spread like a cancer along Detroit's streets, forcing property values further down.

MIKE WALLACE: One of the top officials of Detroit, president of the City Council and one of HUD's chief critics, is Carl Levin. Mr. Levin, you say that H-U-D stands for:

CARL LEVIN: Hell Upon Detroit.

WALLACE: Why?

LEVIN: HUD permitted the speculators, the illegal and bad guys to take advantage of them because their own people took money to overlook defects in houses.

WALLACE: Case in point: this house on Phillips Street on Detroit's East Side. The owner bought it back in 1970 from a real estate speculator. The speculator had paid only $7,000 for it a few weeks earlier. But in return for a $100 cash bribe, an FHA appraiser agreed to insure a mortgage on that home for $14,650.

LEVIN: And when those defects became obvious a year later, six months later, the people who were placed in these houses, poor people, abandoned the houses because they had no equity in them. They just simply walked away when the big cracks showed up.

WALLACE: Once such a house is abandoned, the mortgage company takes over. But since the FHA insured the mortgage, the company has nothing to lose. HUD just pays off the mortgage company, and winds up with still another ramshackle house.

FEMALE HOME OWNER: Everything is crumbling. It's rotten. We weren't in the house six months and there was a leak here. My son went to-- to fix the porch with a neighbor, and he literally fell through, it's so rotten. And this-- even the wall is rotted. Just terrible - and you can Just take and shake the whole thing.

WALLACE: That's the back wall of the house?

HOME OWNER: Back wall of the house.

WALLACE: But you're a smart lady. So, how-- how did they con you into buying it?

HOME OWNER: Well, I'd been brought up to believe that the FHA approved a home, that they are very particular, and if the FHA approved a home, then that home was sound.

WALLACE: No man in Detroit knows more about what's gone on with HUD the past half-dozen years than Don Ball of The Detroit News. Don, how much-- how much Just plain corruption has been involved in this story?

DON BALL: Literally tens of millions. Thousands and thousands of homes were involved in the fraud and corruption. This house here was-- was one of one thousand homes that just one real estate broker paid bribes on.

WALLACE: And that one real estate speculator got how much?

BALL: Well, he said that he made a million dollars. It was his testimony in court. We figure he made more like two million dollars.

WALLACE: Where is he now?

BALL: And he's in New Mexico operating a dude ranch now.

WALLACE: Did he go to jail?

BALL: No, he got probation.

WALLACE: Don Ball says the worst days of HUD corruption have passed, and lately HUD has also been trying not to saddle poor people with homes they can't afford to keep up. HUD's biggest problem now is that it has billions of dollars pledged to real estate in the nation's failing cities, and no city is having a tougher time of it than Detroit. One plant after another has abandoned Detroit. Thousands of small businesses have shut down and moved out. Entire commercial blocks are almost completely boarded up. There are bright spots, like the huge new Renaissance Center. This is supposed to bring new life to the center city, but so far rental agents are way behind schedule in trying to find tenants to fill these huge new towers. Unemployment in Detroit runs at Depression levels - about 20 percent; a staggering 45 percent in some areas. The city faces a huge budget deficit, and one of the highest crime rates in the country. A recent newspaper survey found that 50 percent of Detroit families want out of Detroit. Often they leave just by packing up and walking away from homes which aren't worth the trouble to sell. Today in Detroit alone HUD holds almost 2,000 vacant lots, more than 17,000 apartment units and 8,000 homes - and is having to pick up new homes at the rate of 500 a month! Most of them aren't in the ghetto areas, but in the once pleasant neighborhoods of northwest Detroit. These are not homes of the poor, but of Detroit's lower middle class - solid blue collar workers.

BILL SZYMCAK is one of the top officials in Detroit's HUD office. To get some idea of where HUD's taxpayer money is going, we went with him to northwest Detroit. Here's one of your houses: "For Sale." What'll you sell it to me for?

SZYMCAK: Well, a dollar today, Mike. Actually, we've had it on the market three different times already, and haven't gotten an offer for it: once for $3,500; once for $1,500; and finally we said we'd take any offer, and we didn't get one.

WALLACE: This belongs to you?

SZYMCAK: Yes.

WALLACE: You're going to tear it down?

SZYMCAK: We have no choice now.

WALLACE: And you will lose-- we will lose how much?

SZYMCAK: Twelve to fourteen thousand dollars.

WALLACE: That totals $90 million a year in Detroit alone. A staggering half-a-billion dollars nationwide. Some of these hulks have been waiting more than a year. Demolition contractors have their own tales of HUD mismanagement to tell.

MAN: Two weeks ago I saw three men on the roof of a building that was scheduled for demolition putting new shingles on it. We have seen them paint buildings that have no windows in them that are scheduled for demolition. Just happens to be mismanagement.

WALLACE: Let's take a look at the one down at the corner. The abandoned house on the corner was not yet actually a HUD property, but since it was FHA insured, it soon would be. The mortgage company had foreclosed, and in a few more months it would be able to hand the home over to HUD and get its money out. Until then, the company was supposed to be protecting the property by boarding it up. Let's go inside.

SZYMCAK: Fine.

WALLACE: This is supposed to be locked up.

SZYMCAK: Yes, it is.

WALLACE: Let's see. [Opens door] No.

SZYMCAK: Wide open.

WALLACE: Whew!

SZYMCAK: Well, it's a mess. You can see the heaters have been pried out. It looks as if the copper pipe in the house has been snipped out, and all the plumbing fixtures have been stolen.

WALLACE: Just to maintain the properties --to pay the taxes, keep them free of debris and boarded up-- costs HUD nationwide about a half a million dollars a day. HUD also used to pay out millions of dollars to repair homes for resale, but it was a hopeless task. Ninety percent of those homes were vandalized, either during or after repair. Some homes were actually repaired three or four times over. New fixtures installed one day, ripped out the next. HUD pays management firms to keep an eye on its properties, to keep them clear of debris, to bring in contractors to board them up. In the Jefferson-Chalmers area of Detroit, HUD pays a local citizens group to do the work, the theory being the group will do a good job because it's from the community. Yet, when we made a spot check, we found this HUD house wide open in back. Nearby, several other HUD properties also not boarded up, or strewn with debris. Next day, we returned to that area with Ray Rickman, an outspoken HUD critic who runs that community citizens group.

WALLACE: HUD pays you, Jefferson-Chalmers District Council, to board up these houses and to make sure that vandals don't get in and so forth. Right?

RAY RICKMAN: Yes, yes.

WALLACE: You're doing a good job?

RICKMAN: Yes, we are.

WALLACE: You are?

RICKMAN: Currently, yes.

WALLACE: Come on back with me. We were here yesterday. Now, you people get paid $35,000--

RICKMAN: That's right.

WALLACE: --to keep vandals out. Open windows out here.

RICKMAN: Okay.

WALLACE: Take a look. It looks great out front. Look at this.

RICKMAN: As you notice, that was probably boarded. This was probably boarded. I--

WALLACE: I can show you one right over there--

RICKMAN: That's right. They were boarded yesterday, or last week, or two weeks ago.

WALLACE: Right.

RICKMAN: I'll bet you that there is an order--

WALLACE: Mr. Rickman--

RICKMAN: --to finish boarding them.

WALLACE: Mr. Rickman, HUD has been writing to you people at Jefferson-Chalmers for months-

RICKMAN: That's right.

WALLACE: --since last October---

RICKMAN: Since October.

WALLACE: --saying, "Get your act together. We're paying you, we're paying you." And you complain about HUD. HUD complains about you.

RICKMAN: Well, now, see, you have one complaint on us, and as--

WALLACE: One complaint?

RICKMAN: That's right.

WALLACE: I have a file of papers this deep --complaints made by HUD to--

RICKMAN: No, no.

WALLACE: Don't tell me no. I have the papers in my hand.

RICKMAN: Well, I'm trying to-- I'm trying to respond to you. You're a hundred percent correct in regards to those allegations, and in December when we met with them, we acknowledged. In December of last year, I fired the guy who's responsible for this, fired him cold and flat, and we have a letter stating that we are in perfect compliance at this point. What you have is a case of people that we hired to do this job not doing a good job.

WALLACE: I have the latest study that was made by HUD. We asked them to make a study, a special study. Do you know that twenty to thirty percent of the properties which you are in charge of, they are not being taken care of at this moment?

RICKMAN: No, no, I'm not-- I'm unaware of that. I would like to see it.

WALLACE: According to that study, more than a quarter of the HUD properties in the Jeff-Chalmers area were either littered with debris or not properly boarded up. About a quarter of all your properties--

RICKMAN: I don't doubt it. Again, this is the City of Detroit, this is a problem. Again, as I said to you out front, HUD is to blame. I can stand on the record. HUD has brought more destruction to this city than any other entity that I can think of.

WALLACE: Most of these buildings don't belong to HUD, but HUD still gets blamed for wrecks like these. HUD officials say their organization is a scapegoat for all the ills of Detroit.

JIM YOUNG [HUD Assistant Secretary]: I just don't think HUD is capable of solving all the problems of Detroit. It's obvious that we are not. It is true that the Federal Government takes the rap in many instances because they're available and because of the fact that they do not wish to fight back.

WALLACE: Jim Young is an Assistant Secretary of HUD in Washington, and his biggest job right now is to dispose of HUD's huge nationwide inventory of apartments and houses on which the mortgages have been foreclosed.

YOUNG: In my judgment, HUD has made more progress in the City of Detroit, compared to the rest of the people in power in that particular city, than any other element.

WALLACE: To back up such claims, HUD officials point to a new program to sell 2,000 HUD vacant lots to the city for a dollar apiece. With proper planning, they say, that land bank could become the site of new factories, new housing projects. There is also a joint federal-state-city program promoted by Detroit's Mayor Coleman Young to rehabilitate and sell some 1,000 HUD homes in northwest Detroit. Though the program began in October of 1974, it's only recently begun to make any headway.

WALLACE: You know how many homes have been taken care of since October of 1974?

JIM YOUNG: Not very many.

WALLACE: HUD is continuing to insure homes in Detroit?

YOUNG: That is correct.

WALLACE: Continuing to lose money? You take in 500 homes a month. You lose an average of $14,000 on every sale. That's about $90-million a year. You may be optimistic or whistling past the graveyard, but your own HUD officials out there are pessimistic about the future of Detroit.

SZYMCAK: The condition the house is in now, I don't think we'd be able to sell it for any amount of money at all. So, it probably is a total loss at twenty or twenty-one thousand dollars.

WALLACE: Does this happen a good deal?

SZYMCAK: Yes, it does.

WALLACE: And you'll pay off the mortgage company, even though the house looks like this?

SZYMCAK: We'll probably have to pay them on this, Mike, because it would be difficult for us to prove that they're responsible for the condition that the house is in.

WALLACE: And I keep talking about you. Actually, it's you and me and all the rest of the taxpayers.

SZYMCAK: We are paying for this house.

WALLACE: Question: Why should HUD continue to pour money into that city?

JIM YOUNG: It's very simple. We continue to pour money into it because we may be the last resort in some regards for the city. Now, I'm talking about the Federal Government in this case. I'm not talking about just HUD. That has been a very vital city over the years, a vibrant city, and because it's in trouble right now is no reason for us to cut and run, as I said earlier. We're going to have to stick with them. What's the alternative?

WALLACE: Last week, Jim Young went to Detroit to take his first look there. He predicts HUD will be able to get rid of more than half its properties there within six months. But meantime, HUD goes right on insuring mortgages in Detroit.

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