The death of Freddie Gray in police custody in Baltimore and the ensuing protests brought the nation’s attention to the economic devastation that continues to grip the city. Now, new data shows powerful hedge funds are profiting off of struggling families in Baltimore by buying up debts as small as $250, charging high interest rates, and taking their homes when they fail to pay. A report just released by the research and advocacy group HedgeClippers documents how the Wall Street hedge fund Fortress Investment Group and the Los Angeles-based Imperial Capital bought up hundreds of these small liens this year — on everything from an unpaid water bills to delinquent property taxes — and could take property worth tens of millions of dollars if the families can’t pay.

Once the hedge funds buy up these small debts, they reap an 18 percent interest, according to the Baltimore-based research group The Abell Foundation. More fees pile up after four months, and if the families can’t pay, they lose their homes. An analysis of those impacted in 2014 found the families had been living in their homes an average of 21 years. Half were elderly, more than a third were disabled, and the majority were African American.

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The hedge funds reaping these profits in Baltimore are also major donors in national elections.

Imperial Capital’s directors have lavished money on Mitt Romney and other Republican candidates in past races. This year, Several employees of the Fortress Investment Group gave the maximum legal amount to Hillary Clinton’s campaign, and its director Michael Novogratz has poured hundreds of thousands of dollars into backing Robert Menendez (D-NJ), Charles Schumer (D-NY), and other Democrats in congressional races over the past few years.

Clinton, a beneficiary of the hedge fund’s generosity, recently said in a speech about Baltimore’s woes: “Let’s take on the broader inequities in our society. You can’t separate out the unrest we see in the streets from the cycles of poverty and despair that hollow out those neighborhoods.” Thinking back to the beginning of her career as a lawyer at the Children’s Defense Fund, she added, “Our legal system can be and all too often is stacked against those who have the least power, who are the most vulnerable.”


Think Progress