Kaplan, community members discuss city's bond debt deal with Goldman Sachs
By Ryan Phillips - OaklandNorth
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In 1997, Oakland and the investment bank Goldman Sachs agreed to a rate-swap deal relating to $187 million in city debt. The deal allowed the city to convert floating interest rates on the debt into a fixed rate of 5.6 percent. But what appeared to be a good deal at the time has proved costly in the long run, after the market collapsed in 2008 and interest rates dropped to below 2 percent. The city has come out on the short end of the deal, and has already paid out $26 million more than it owed and is currently paying $5 million annually.
The deal has upset many in the city because when the market crashed in 2008, big banks like Goldman Sachs were bailed out with billions in taxpayer money, but now that Oakland is in dire financial straights, the bank hasn’t agreed to renegotiate the terms of the deal to give the city some relief. As a result, Kaplan said, there is “less money for public services” because money is being paid towards Goldman Sachs.
“As it says in Leviticus, chapter 25, verse 6, ‘If your kinsman being in straights comes under your authority, let him live by your side. Do not extract from him usery through interest,” Kaplan said to a group of about 75 people sitting in folding chairs in an auditorium at the church.
“Do not lend upon usery,” Kaplan continued, to calls of “Yeah!” from the crowd. “Do not lend upon usery. That means do not charge unjust interest. ‘Do not charge unjust interest’ is in here 4,000 years ago. People were worrying about unjust interest and it is still an issue today.”
Kaplan has called the deal a “toxic asset” for the city, and last June, wrote a letter to Goldman Sachs CEO Lloyd Blankfein asking to renegotiate the deal because companies like Goldman Sachs have a responsibility to “operate in a manner that would be beneficial to the public” after using “taxpayer dollars in order to salvage private, for-profit corporations.”
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