Oakland Residents: Time To Hold Wall Street Responsible For City’s Financial Woes
As city officials in Oakland, Calif., debate which of the city’s services to slash, which bills to pay, and which workers to keep, employee unions and nonprofit grassroots organizations are firing back, saying it’s time to hold Wall Street responsible for the city’s financial issues.
While Oakland was not the only city affected by the 2007 financial crisis, it is arguably one of the hardest-hit by the actions of the big banks. For the past five years, the city has faced record budget deficits, prompting the city to make cuts that one grassroots community says have “crippled the city’s ability to keep our neighborhoods clean and safe, limited access to libraries and recreation centers, and deprived our youth of meaningful programs to keep them off the streets.”
“Our Oakland communities have been robbed blind by the banks and they need to pay back the money they took from the people of Oakland,” said Shirley Burnell, an Oakland resident and member of the grassroots Alliance of Californians for Community Empowerment during a rally at the beginning of July.
In a June 2013 report, the ReFund and ReBuild Oakland Coalition says that the banks’ “predatory practices” allowed them to “drain” taxpayers of about $468 million — an amount that is close to the city’s general fund budget for an entire year. The groups say that in the past 16 years, big banks have stolen about $500 million of taxpayer dollars due to their “greedy and predatory behavior.”
Though investigations into the financial collapse around the globe found numerous criminal conspiracies by big banks to “steal billions from taxpayers,” local governments have yet to be repaid for any fraudulent activity.
“Just as banks and mortgage brokers peddled high-cost loans to unsuspecting new homeowners, the finance industry has been bilking taxpayers by peddling high cost, risky financial deals to our public entities – another category of ‘predatory deals’ – through unfair, risky, deceptive, and even fraudulent practices,” according to the coalition’s June report.
“As our public budgets have suffered, preventing us from investing in our communities, financial profits have soared. In 2006, prior to the financial crash, financial profits accounted for a third of total corporate profits in the United States.”
Wall Street continues to bleed Oakland dry of its tax dollars
Many Oakland residents were upset by the recent discovery that even after numerous investigations found Wall Street banks were largely responsible for the 2007 financial collapse, Wall Street still has at least five different “predatory practices” in place in the city.
One of the biggest fraud schemes affecting Oakland is the manipulation of an international interest rate called the London Inter-Bank Offered Rate, or LIBOR. The LIBOR fraud alone has cost the city more than $15 million since 2008.
According to a report from a local news outlet, the extra money the city has paid as part of the LIBOR fraud scheme is enough to fund Head Start for at about 10 years. Instead, the city has been forced to decide between cutting Head Start programs and making additional pay cuts to city workers.
Another program that cost the city a great deal of money was its deal with Goldman Sachs to keep interest rates on government-issued bonds at a consistent rate. The thought process was that if the interest rate spiked on the bonds, the government would not be able to afford the payments, so the city agreed to a deal with Goldman Sachs to offer a steady fixed rate to the government. Goldman Sachs was to pay the government a variable rate to cover the bond payments, but when the economy crashed and the banks were bailed out, the low interest rates ended up costing the city million of dollars.
Deborah Santana is a member of the Oakland Coalition to Stop Goldman Sachs. Talking to the East Bay Express, she said the new report “supports the agenda her group has been pursuing with the city council,” adding that she and other members of the group were able to convince the City Council to bar Goldman Sachs from future city business.
“We did some independent investigation and gave results to city council so they had other information besides what the city administrator was giving them,” Santana said. “Now they have someone else looking at these various complex financial deals, and demystifying it for them, so this is very helpful.”
Other predatory behavior the city is still dealing with includes having to pay banks excessive fees and interest on credit insurance policies, debt from taking out pension obligation bonds, and capital appreciation bonds that have ballooning interest rates.
Many Oakland residents were affected by the financial collapse, as well. More than 10,000 homes in Oakland have been foreclosed on since 2007, which the Alliance of Californians for Community Empowerment says has not only led to a decrease in property values, but has permanently “changed historically African American and Latino communities.”
A 2011 report from the alliance found that Oakland homeowners would lose around $12.3 billion in home values as a result of the crisis. The foreclosures are expected to cost the city $75.3 million in lost property taxes and $224 million from having to keep up the vacant properties.
Founded in 2010, the alliance started off as an organization attempting to give a voice to Oakland and other California residents, but it has since expanded to become an advocate for people across the United States. Alliance members work not only to reform legislation that allowed banks to take advantage of homeowners at a federal level, but to help families save their homes from foreclosure across the nation and “keep the pressure exactly where it belongs — on the big banks who continue to foreclose on neighborhoods across Oakland.”
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