Goldman Sachs's Relationships With Oakland and its Port

In 2011 it was amazing to watch the violent reaction of the Oakland Police to Occupy Oakland's  desire to shut down the Port which is thriving while the city of Oakland is not doing so well.  The profits made at the Port do not go to the public.  "The port operates (rent-free) on public land, all of its operating profits go to pay back the bonds that paid for its modernization or are re-invested in the port itself."  Thus, Goldman profits "while schools close and workers suffer."

Why this violent reaction to what began as a peaceful protest?  If you read about Goldman Sachs's underwriting of many of the Port's development of public/private businesses, you will see a familiar pattern evolving:  the revolving door between Goldman and government, whether federal or municipal, and that between government and Goldman.

Here's how Goldman Sachs uses the revolving door to privatize public utilities such as ports and airports.  First, they hire pivotal people from the government (Kathleen Brown) or they train people who then become financial advisers to municipalities (Sara Lee).

For example, Kathleen Brown was California's state treasurer (1991-1995) where she oversaw "California’s finances that are a source of immense profits for the investment banking sector" and now works with Goldman Sachs as a private wealth adviser.  She also happens to be the sister of Governor Jerry Brown. 

Another example, Sara Lee, the present CFO of the Port of Oakland, worked for Goldman Sachs as a vice president before gaining that position.

Jeffrey Holt worked with Kathleen Brown at Goldman.  After leaving Goldman he became managing director of Bank of Montreal and still arranges private financing for ports.  He is an expert on "privatization of infrastructure."

So you can see that Goldman Sachs knows how to pick its winners.

The Port of Goldman Sachs
By Darwin BondGraham
. . . .
On the debt underwriting side, most recently Goldman Sachs has been selected as dealer for the Port’s 2011 and 2012 $200 million commercial paper loans to finance various capital projects including “site preparation and redevelopment of the former Oakland Army Base, and remaining costs associated with the deepening of the navigational channels to 50 feet,” as well as “funds to facilitate development plans for the Oak-to-Ninth District.”

In other words, Goldman Sachs is stands to doubly profiting by dealing the Port’s commercial paper. The first profit comes from the spread earned by acting as dealer. The second source of profit will be derived from the improved infrastructure that will be used by companies such as Prologis, AP Moller-Maersk, and K-Lines, which the bank owns small equity stakes in, or from the Oak to 9th project.

Real Estate

Rounding out Goldman Sachs’ nearly ubiquitous presence in the Port’s finances and operations is a proposal that allows Goldman Sachs to participate in the redevelopment of Oakland’s waterfront. The Oak to 9th project, ostensibly led by Bay Area-based developers incorporated as Oakland Harbor Partners LLC, involves building housing, retail, and parks on large land holdings owned by the Port.

Read the full report here