Goldman-Sachs, a vast and vastly profitable Wall Street investment firm, has been referred to as a “vampire squid” by Matt Taibbi in his now famous expose “The Great American Bubble Machine.”
Learn via the Socratic method how Goldman-Sachs screwed Oakland, then how Oakland screwed itself trying to redress its grievances.
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Q. Just how did Goldman-Sachs screw Oakland?
A. Years ago, Goldman-Sachs agents convinced Oakland to enter into financial instruments known as “interest rate swaps.” These made it impossible, when interest rates plummeted in 2008, for Oakland to get a better rate on the target of these swaps, various bonds, without paying a massive penalty. Even though the underlying bonds have now been paid off, Oakland owes Goldman-Sachs a yearly “tithe” of some $4M through 2021 due to these swap agreements.
Q. Was anyone upset?
A. Yes! In 2013 the Goldman-Sachs Coalition got the City Council’s attention and got them to attempt to 1) renegotiate the deal (to no effect), 2) say they would do no further business with Goldman-Sachs unless the deal were renegotiated, and 3) investigate whether Goldman-Sachs should be debarred.
Q. What the hell does “debarred” mean?
A. It basically means finding that a company has violated either laws or standards of behavior to such a degree so as to conclude that they should be prohibited from doing further business with the City. There is an Oakland City statute describing the debarment procedure, which provides criteria and gives the City Administrator the power to initiate the process.
Q. Does Goldman-Sachs qualify for debarment according to the criteria?
A. Why yes, yes it probably does! Even though it is not a convicted felon (like some other large banks), the criteria cover a wider range of nefarious behavior than just a felonious conviction, and there is little doubt that Goldman-Sachs qualifies under the “preponderance of evidence” basis for a decision stipulated by the debarment ordinance. (e.g., the Taibbi article referenced above, or this article in McClatchy).
Q. So were they debarred?
A. No.
Q. Why not?
A. In July of 2013, the City Council passed a resolution authorizing the City Administrator to negotiate a contract for $226,378 to a consulting firm, Spinnaker, to investigate Goldman-Sachs, to see whether they should be debarred.
Q. Isn’t that a lot of money for something you claim is obvious?
A. Why yes, yes it is!
Q. Did the contract get negotiated?
A. It appears to have been. We have Spinnaker’s response to the City’s RFP, dated June, 2013. And here is the City Council resolution, passed on July 30th, 2013, authorizing the contract, in three parts, and the amount to be paid, which says in part:
“Investigative Services For Debarment Of Goldman Sachs Adopt A Resolution Authorizing The City Administrator To Negotiate And Execute A Professional Services Agreement With Spinnaker Consulting, Inc…”
In the minutes for that meeting, it says the motion was approved 6-0, 1 excused, 1 absent. Here’s an article about the new contract.
A Public Records Request produced a copy of a check to Spinnaker for $71,760, dated 04-03-14 (see the image of the check here) with a puzzling “Void” scribbled over it. We aren’t sure whether they were paid or not.
Q. So what did Spinnaker find?
A. No one seems to know.
Q. What do you mean, no one seems to know? Is there a report?
A. No one seems to know.
Q. What happened to the $71,760 and the rest of the $226,000 allocation?
A. No one seems to know.
Q. Seriously?
A. Seriously. Here is a public records request dated July, 2015, requesting information on the status of the contract. The request was denied.
The Phase One Report and related documents are exempt from disclosure, as it is in the public’s best interest that these documents remain confidential because releasing these documents could interfere with the investigation and/or the independence of the adjudicator while the administrative investigation and/or adjudicatory procedures are pending.
Q. It’s been more than two years! What investigation?
A. Exactly. This is bullshit. There is no investigation. There may or may not be a Phase One Report, but if there is one no one has done anything with it for what is likely at least year and a half, and they don’t appear to have paid for any further investigation because there’s no revealed record of more checks to Spinnaker.
Q. Is this what is referred to as government transparency?
A. We prefer to think of it as government by the banks, for the banks, and of the banks.
Q. Has the City Council been informed?
A. We have presented to an aide to Oakland’s At-Large representative on the Council, Rebecca Kaplan, about this. She has not responded. We have presented the issue to another City Councilor, Annie Campbell-Washington, who is the representative for one of our members. She has not contacted us further; she did say she would follow up with the City Administrator, as did Dan Kalb and Abel Guillen, to whom we also explained this situation.
We presented the issue at a City Council Rules Committee meeting in late September, and the issue was said to be moving through Council procedures to be considered, but we haven’t seen any evidence of progress. We have met with City Council President McElhaney as well.
Q. What about the City Administrator?
A. We have attempted to communicate about the contract with the City Administrator’s office, and while they seem responsive no one there seems to know anything about it, either.
Q. The City Attorney?
An aide to the City Attorney told us that Spinnaker had completed the first part of the contract and had submitted their Part I report, but was unable to provide us with said report, leaving us, despite the reply on the Public Records Request above, still unsure whether any work was actually done.
Q. What about the City Auditor?
A. The City Auditor disclaimed responsibility.
Q. What about the consulting company?
A. A phone call to Spinnaker Consulting resulted in them neither confirming nor denying that they have or had a contract with the City of Oakland, then hanging up.
Q. This is all for real?
A. Yup.
Q. Who are you? Why do you care?
A. We’re Strike Debt Bay Area, fighting unjust and odious debt. It’s bad enough Oakland got screwed by Goldman-Sachs with its debt contracts. But to screw itself even further by paying up to $238K for a report we would have been happy to put together for $10K – and then either losing the report or never following up enough to insure it was done, and never taking action on it if it was, and losing track of it OVER A TWO YEAR PERIOD – is ridiculous. Don’t you agree?
Q. I thought I was the one asking the questions?
A. True enough. Agreement for $2000, Alex.
A. “Oakland and Goldman-Sachs.”
Q. What is a SNAFU?
A. Correct.
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