How interest rate swap deals are causing local government agencies to pay millions of dollars to the biggest banks
Joe Keffer of the Service Employees International Union (SEIU) Local 1021 said at the Feb. 21 rally that Oakland has already paid Goldman Sachs $26 million on a swap that dates back to 1997, and that under current market conditions, the city will have to pay roughly another $25 million until the contract expires in 2021.
Oakland's toxic deal with Goldman Sachs is now the subject of much scrutiny. The newly formed Coalition for Economic and Social Justice —made up of churches, labor unions, neighborhood groups, and Occupy Oakland activists— took up the issue with the City Council on Feb. 21, packing the chamber with one of the more diverse activist coalitions in recent memory.
"We're here to implore you to get the City of Oakland out of this toxic relationship," Rev. Daniel Buford of the Allen Temple Baptist Church told the council.
Members of the Oakland City Council are sympathetic to this message. In a letter sent last June, Council member Rebecca Kaplan implored Goldman Sachs CEO Lloyd Blankfein to spare Oakland's taxpayers: "By bringing the contract to conclusion with no penalty fees, and negotiating a reasonable exit strategy, you would be demonstrating good faith to public taxpayers in the most substantial way." At the conclusion of public comment Tuesday night, Oakland Council member Libby Schaaf promised the public action on the swap.
In a Valentine's Day protest the previous week, 50 activists visited the Oakland offices of Morgan Stanley. Faculty and students from the Peralta Community College system went there demanding the bank renegotiate a rate swap that is estimated to have cost the college $1.6 million last year. The same day the college's board of trustees discussed the need to cut $12 million more from the budget in 2012. Morgan Stanley CEO James Goreman's pay for 2011 was $14 million, opponents of the swap point out.
Peralta student and Bay Area transit activist Adam Ross attempted to reach the 9th floor offices of Morgan Stanley in a small delegation to deliver a letter demanding the bank renegotiate the swap: "There were signs on the door saying the office was closed. They probably got tipped off and locked the doors."
Afterward, Caesar Swaby of Riders for Transit Justice addressed the rally, connecting dots for the different constituencies present: "Morgan Stanley is taking money from Peralta College, causing classes to be cut. Morgan Stanley is also taking money from transit riders. Morgan Stanley has a $3 million rate swap with the MTC, causing cuts to bus and train services."
A Morgan Stanley representative declined to comment for this report. Goldman Sachs did not return calls and emails. A spokesperson for the MTC was unable to be reached by deadline.