You Tell Us: Is Goldman Sachs holding Oakland hostage?
on May 31, 2012
We write together today – as a pastor and a politician – to ask for social justice.
The Great Recession of the last five years has been a travesty that we’ve all shared in together. We’re still working to recover – to regain our jobs, our homes, and often, our dignity.
And even as we’ve had things taken from us, we’ve still been a giving people. Told that they were “too big to fail,” we bailed out American banks to stave off financial disaster, helping save this country from the brink of ruin.
So, as residents of Oakland – a shining city – it’s outrageous to watch bailout beneficiaries like Goldman Sachs continue to hold hostage our city.
One of the largest banks on the planet, Goldman Sachs refuses to let the City of Oakland refinance the municipal bonds it owns. Holding onto these “toxic assets” has allowed the company to pocket almost $30 million of our money – and to keep profiting at a rate of $5 million a year.
That is, of course, unless Goldman Sachs agrees to let us renegotiate.
Leviticus 25:6 tells us, “If your kinsman being in straights comes under your authority, let him live by your side. Do not extract from him usury through interest.”
Do not charge us unjust interest, Goldman Sachs.
We implore you – the good people of Oakland implore you – to help us recover from the recession the way we helped you.
The bank bailout was justified to the public on the grounds that it would enable companies such as Goldman Sachs to be able to operate in a manner that is beneficial to the public.
But the second part hasn’t taken place, and this is evidence of that.
The City of Oakland will continue to negotiate – and will take whatever action is necessary – to terminate this “deal.”
But do unto us the way we graciously did unto you when you were in trouble, Goldman. We used taxpayer dollars to salvage private, for-profit companies like yours.
As with many other cities across our country, our struggle with debt continues. This poses an even greater burden at a time when we grapple with some of the harshest cuts to our most basic and critical services. The weight of this contract threatens to further destabilize our city, threatening the most basic core services.
This is money that could build a health clinic in East Oakland, create a jobs program in West Oakland and so much more.
On behalf of our parishioners, our constituents – and a large coalition of active and vocal community members throughout this city, we demand action to terminate this deal.
Join us in demanding that Goldman Sachs renegotiate our debt – the same way we renegotiated theirs.
Reverend Daniel Buford serves the Allen Temple Baptist Church in Oakland and Rebecca Kaplan is the at-large member of the Oakland City Council. This op-ed essay previously appeared in the Oakland Post.
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16 Comments
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Not only Oakland, but many more struggling cities have shared objectives with the Occupy movement. (Actually all substantive objectives are shared, but I digress.)
What if, somehow, Cities and OWS could work together to resolve shared objectives.
What if…
Why can’t Oakland refinance with another lender and pay off the Goldman Sachs loan? I seriously hope the city council did not agree to a loan with a prepayment penalty!
“This is money that could build a health clinic in East Oakland, create a jobs program in West Oakland and so much more.”
Sure, but what would it really get used for?
Yes we might spend the money on a health clinic, but more likely on trying to retain athletic teams. Now if we could get out of the Oakland Coluseum deal – that would be big money…
If this is a standard swap, GS agreed to pay the variable interest on our debt, however much it goes up or down, while Oakland pays a fixed 5.5% interest. We bought insurance against interest rates going up. Presumably when we took the swap we thought it was a good deal. Now why we originally borrowed variable is another question.
If interest rates do go up in the future, we are protected.
However, if we do get out of the swap, we are responsible for the full rate. Can we afford this? Now of course this is a future problem, we don’t think about it now, we will just spend the money; someone else will have to deal with this problem.
“Social justice”? Oakland “held hostage”? This whining is embarrassing. Who told Oakland’s elected officials to make such an irresponsible decision? Whose fault is all this?
As an Oaklander, I find such whining to be embarrassing.
[…] Click through to Oakland North to read the rest of the op-ed essay by Rev. Daniel Buford and Oakland… […]
You mean the same Goldman-Sachs that has several former executives in the Obama administration?
The democrats in charge of Oakland make poor financial decisions, support a president who continues to make poor financial decisions while raking in money from Wall Street, and your ire is directed at the lending organization?
I’m not saying the Republicans would be better, but at least if they were in charge you would certainly include them in your rant rather than giving Kaplan and her ilk a pass on the mismanagement that got us into this mess.
At next Tuesday’s council meeting, ask what the investment banker fees will be for the hundreds of millions of pension bonds the council and Mayor are planning to slide thru.
Also ask what happens if the stock market drops instead of doing better than the bond interest rate we’ll be paying out?
Considering that has happened at least once or twice before and largely created this huge debt, why assume we’ll beat the stock market this time?
The Goldman Sachs deal is a rear guard battle at this point.
But the pension bond refi can still be stopped so that we make sure we all understand the risks involved.
Len Raphael, Temescal
Op ed on Pension Bonds http://www.insidebayarea.com/opinion/ci_20807658/oakland-tribune-my-word-neither-council-nor-taxpayer
Len Raphael, Temescal
Actually the Goldman Sachs interest swap is related to a prior issue of pension obligation bond that had a floating rate. So not only did we lose hundred of millions using bond proceed to bet on the stock market, but we’re still paying Goldman for the interest rate swap long after we refi’d those variable rate bonds.
All these years the swap has not cost the city’s general fund a penny. The payments have come out of the property tax override revenue that can only be spent on PFRS but has been spent on anything remotely pension related, including quite possibly CALPERS contributions.
The other day Scott Johnson, assistant city admin was quoted as saying Goldman Sachs had expressed strong interest in participating in the (now approved) $250 Million pension obligation bond offering.
GS the consummate deal maker is likely to offer to cut the swap exit fee in return for getting out of the interest rate swap in return for an equivalent discount on the cost of the bonds.
City officials have not released any info on expects costs of the bond issue, nor have they in prior POB issues. The muni bond market is notoriously opaque with the true cost of bonds hidden both from taxpayers and end bond investors.
If GS worked that deal it would make City officials look like hero’s and GS look contrite but the residents would take it in the shorts on the bond pricing.
At tonight’s city council meeting I described that scenario to an SEIU member.
He laughed and said that would be fine with the SEIU because they were less interested in saving the city 5 Million/year, then they were in showing they had clout and building their base of support.
Len Raphael, Temescal
Sad that for all this energy devoted to terminating the swap, the opponents all assume that if the swap were terminated, the millions of annual fees would be freed up to spend on important needs.
Cannot assume that is true. Very likely that the fees have been getting paid with the “tax overrides” that are only supposed to be used to fund the ancient cop/fire pension fund, PFRS, using the justification that the swap was originally done to hedge old PFRS pension obligation bonds.
If true, terminating this swap at best would free up more of the tax override money five years from now when the balloon payments on the new PFRS.
We need a full accounting of how the city has spent close to a billion dollars of property tax overrides over the past 25 years and yet we still owe 400 million to the PFRS pension fund.
http://www.insidebayarea.com/opinion/ci_21060817/my-word-goldman-rate-swap-red-herring
Another layer peeled back from the rotten onion aka Oakland’s interest rate swap and pension obligation bonds.
The role played by the city council and past mayors in approving the swap is not pretty.
http://www.eastbayexpress.com/ebx/goldman-swaps-subsidized-private-corporations/Content?oid=3289626&cb=55657eef0b9b763922aec2c771a59768&sort=desc#readerComments
Not much has improved in the dysfunctional government of Oakland in at least a decade, as shown by the recent Council approval of another +200 of pension bonds.
But the media coverage of complex policy issues has vastly improved. So there’s hope things will change.
Len Raphael, Temescal
DISENGAGE ! Stop pleading and begging. Write them Goldman Sachs a carefully worded letter telling them you are not playing this game anymore and that any agreements you entered into with them are null and void. Write to all your citizens and tell them what you have done and tell them how you intend to organise your community’s finances going forward .