End Oaklandâ€™s Toxic Deal with Goldman Sachs!
Posted on 23 February 2012 by lucaswolf
Occupy the Hood, Decolonize Oakland, SEIU Local 1021, Oakland Community Organizations (OCO), and Oakland clergy packed the city council’s chambers on Tuesday evening (Feb 21) to demand an end to the city’s “toxic deal” with Goldman Sachs. Oakland makes million dollar payments to the bailed-out speculative banking corporation every year, which have totaled $26 million since the late nineties and potentially over $2 million more per year until 2021. Coincidentally, that is the exact same amount that would be required to keep open the 5 schools slated for closure.
Goldman Sachs’ colossal gambling addiction played a central role in crashing the global economy in 2008, but rather than receiving any type of retribution, they have instead received multiBILLION dollar bailouts of public money. This government welfare subsidized the billions in private profit they make in a year, and the tens of millions they pay their CEO alone. Meanwhile, the city of Oakland and municipalities across the country received no bailouts and have been passing worse and worse austerity budgets each year.
As Goldman Sachs receives free support in the form of taxpayer money (TARP) and an essentially open spigot of no-interest loans from the Federal Reserve, Oakland has been paying a fixed 5.6% interest to them for debt in which the principal has already been paid, activists from Occupy the Hood say. The East Bay Express breaks it down:
“The toxic rate-swap agreement in question dates to 1997 when Goldman Sachs convinced Oakland officials that it would protect taxpayers against the possibility that interest rates would rise on variable rate bonds that the city planned to issue the next year. Rate swaps — essentially contracts between two parties — allow governments to transform variable-rate debt payments into fixed-rate debt. Oakland’s deal with Goldman Sachs converted floating rates on $187 million of bond debt into a fixed 5.6 percent.”
“The problem for Oakland, however, was that floating interest rates only briefly exceeded 5.6 percent in the past fifteen years; first between 1998 and 2001, and again at the height of the housing bubble between 2006 and 2008. During the economic recession that followed 9/11, interest rates plummeted below 2 percent, forcing Oakland to make much higher payments to Goldman Sachs than it would have had it never signed the deal. Then, with the collapse of the economy in 2008, the US Federal Reserve reduced its lending rates to virtually zero, with variable rates in markets trailing close behind. Yet Oakland was still stuck paying more than 5 percent.”
Decolonizers brought the heat to the council during a lengthy open comment session, each speaker’s words multiplied by the signs and cheering behind them. Luz Calvo, an ethnic studies professor at Cal State East Bay, quoted a famous saying, “‘Give a man a gun and he can rob a bank. Give him a bank and he can rob the world.’ That is exactly what is happening,” she said. ”Every politician always says they’re tough on crime. Now it’s time to go after the REAL criminals.” Another speaker pointed out that Los Angeles has already set a precedent for nullifying its swap deals.
Councilmember Libby Schaff responded by saying that this issue will be “agendaized” at a future meeting. ”We’ve already asked for the termination fee to be waived,” she said. To that someone shouted, “Don’t ask, demand it!” And she corrected herself to “demand.”
Were this to pass, it would recuperate millions of taxpayer dollars per year for the people of Oakland, free the city from the snare of corporate debt, and continue to build momentum for the movement of the 99%.