SAN FRANCISCO – Oakland residents and their San Francisco supporters gathered July 31 outside Goldman Sachs headquarters in the financial district, to support the City of Oakland’s demand that the financial giant end a 14-year-old interest rate swap that has cost the city millions of dollars in recent years.
On that day, Oakland was slated to pay its twice-yearly $2 million swap payment to Goldman Sachs.
As rally-goers prepared to present the financial giant with a letter demanding it end the swap without penalty, they joined in street theater portraying a top-hatted CEO, Mr. Blank Check, running a swap meet to make millions by selling off the city’s services.
“We continue to lose services because we have banks like Goldman Sachs, who understand how to take advantage of programs to relieve their debt crisis, but can’t understand how to work with cities like ours to alleviate some of the crisis we are having,” Oakland City Councilwoman Desley Brooks told the demonstrators.
“They have received all the money they were supposed to get,” Brooks said. “If we stop these greedy banks from preying on our communities, we will all be better off.”
San Francisco Supervisor John Avalos congratulated “the people of Oakland,” adding, “Oakland could be just the tip of the iceberg.” Avalos noted that many other government entities in the Bay Area’s nine counties could be suffering from such deals as well: “Here in San Francisco our airport has a $17 million liability with Goldman Sachs. I’ll be looking into that as well.”
Before the rally, Jon Asmerom of the Service Employees International Union Local 1021 called the swap agreement “an immoral obligation.” He emphasized the pact’s role in depriving Oakland residents of “much needed public services” like libraries, fire prevention and infrastructure, “all because Goldman Sachs prioritizes its bottom line over what communities need. We reserve the right to prioritize our needs.”
Oakland’s City Council July 3 unanimously voted to cut ties with Goldman Sachs if it refuses to end the swap without charging the city a nearly-$16 million penalty. The council gave the bank 60 days to renegotiate or the city will exclude Goldman Sachs from future business.
Oakland is the first city in the country to take such an action.
The issue dates back to 1998, when the city entered into an “interest rate swap” with Goldman Sachs, trading a variable interest rate for a fixed interest rate that was relatively low at that time. The city says the deal worked well for years, until the financial crisis hit. Then the city had to keep paying the higher fixed rate while the interest rate paid by Goldman Sachs plummeted, greatly lowering the bank’s obligations under the deal. Meanwhile, the original bonds were refunded (paid off) in 2008.
The letter to Goldman Sachs CEO Lloyd Blankfein, which rally-goers tried unsuccessfully to convey to security guards across a metal barrier, pointed out that Goldman Sachs got tens of billions of dollars under the Troubled Asset Relief Program (TARP) and other post-financial-crash help. “You were relieved of your ‘troubled assets’ by the taxpayers,” the letter said, “but the City of Oakland is still stuck with your toxic swap deal, with no relief.”
The labor-community-occupy-faith Oakland Coalition to Stop Goldman Sachs says bank swap deals will cost Bay Area taxpayers nearly $125 million this year. Among the governmental entities involved: the cities of San Francisco, Richmond and Pittsburg, the Peralta Community College District and the East Bay Utility District.
Over 1,100 public agencies nationwide are reportedly involved in interest rate swaps, at a cost to taxpayers of more than $2.5 billion annually.
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