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Oakland Officials, Clergy, Community to Visit Goldman Sachs HQ to Demand Fair Deal
Tuesday July 31
Goldman Sachs San Francisco Headquarters, 555 California St, San Francisco, 94104
FOR IMMEDATE RELEASE
Tuesday, July 31, 2012
Bahar Tolou (323) 899-3399
As City of Oakland is scheduled to make a $2 million payment to Goldman Sachs, Oakland Elected Officials, Clergy, Community Visit Goldman Sachs SF Headquarters to Demand Fair Deal for Oakland
Delegation Follows Oakland City Council Vote to Renegotiate $16 Million Swap Deal Or Cut Ties With Goldman Sachs
Bay Area losing nearly $125 million in swap deals annually
SAN FRANCISCO, CA - Oakland City Council members will join Oakland faith leaders and residents at Goldman Sachs’s San Francisco headquarters to demand the bank agree to end costly deal without a multi-million dollar payout from taxpayers to Goldman Sachs. The “interest rate swap” deal has already cost the City $32 million and could cost $16 million more. Today, the City of Oakland is scheduled to make a bi-annual swap payment of $2 million to Goldman Sachs on the swap deal.
Oakland community members will hold a “Swap Meet” outside Goldman Sachs headquarters in San Francisco’s Financial District to illustrate the cuts to Oakland neighborhoods as the City is forced to pay Goldman Sachs millions every year on a bad “swap” deal.
The action comes after the Oakland City Council unanimously voted to cut ties with Goldman Sachs if they refuse to negotiate to let the City out of the swap without the $15 million penalty. Goldman Sachs has 60 days to renegotiate or the City will exclude Goldman Sachs from future business.
The City of Oakland is the first City to demand renegotiation of bad swap debt, though Oakland is not alone in being subject to such a deal; hundreds of public agencies across the country are trapped in similar swap deals costing taxpayers millions in payments to Wall Street banks.
When: Tuesday, July 31, 2012, 11:30AM
What: Press Conference, Swap Meet, Delegation, Community launch “Goldman Sachs Countdown”
Where: Goldman Sachs San Francisco Headquarters, 555 California St, San Francisco, 94104
Who: Oakland Council member Desley Brooks; Pastor Brian K. Woodson, Bay Area Christian Connection; community members with Coalition to Stop Goldman Sachs, ACCE, SEIU Local 1021, Decolonize Oakland, Occupy Oakland Interfaith Tent, Occupy Oakland Labor Solidarity Committee, ROOTS, and BBBON
Background on Goldman Sachs Swap Deal:
In 1998, Oakland Joint Powers Financing Authority issued $187.5 million in variable-rate bonds to refund the 1988 Series A Special Refunding Revenue Bonds. As part of the bond deal, Goldman Sachs sold a financial deal called an “interest rate swap” to the City of Oakland on the premise that the swap would reduce borrowing costs for the City. In a swap agreement, the City pays the banks a steady fixed rate, and in exchange the banks pay back the fluctuating variable rate to the City to cover the interest payments on the underlying bond. At that time, this swap deal made sense because interest rates were expected to rise, and this allowed the City to lock in a relatively low fixed rate at the time.
But after banks crashed the economy, as part of the rescue of the financial system, the Federal Reserve cut interest rates to near zero to give banks access to cheap money—an unanticipated event that radically changed the math on the deal. As a result, Goldman’s variable rate has dropped down to 0.15%, but Goldman has the City locked into the above-market rate of 5.68%. The bank is pocketing the difference as profit—$4.2 million annually. Goldman will not let Oakland taxpayers out of the deal unless they pay nearly $15.5 million in penalties.
Oakland actually refunded the underlying variable-rate bonds in June 2008, but the City could not terminate the swap agreement without paying a penalty to the bank. As a result, the City has paid Goldman Sachs $17.5 million over the last four years even though the underlying bonds that the swap was supposed to hedge no longer exist. The City is locked into this deal until 2021.
Here in the Bay Area, swaps will cost taxpayers nearly $125 million this year:
• San Francisco will pay $17 million in swap fees this year;
• Richmond will pay $1million;
• Oakland, will pay $4 million;
• Pittsburg will pay $3.6 million;
• The Peralta Community College District will pay $1.6 million;
• The East Bay Utility District will pay $31.3 million; and
• The Metro Transportation Commission will pay $48.6 million
• VTA will pay $13.0 million;
• Menlo Park will pay $3.1 million
Added to the calendar on Monday Jul 30th, 2012 3:13 PM