Oakland Must Wait to Drop Goldman Sachs
Oakland City Treasurer Katano Kasaine told members of the city council on Tuesday that its attempts to fire Goldman Sachs Groups, Inc. after the city's rate-swap deal with the bank soured during the recession could take months and be "very expensive."
The deal, made back in 1998 when the city was looking to hedge itself against possible increases in interest rates, will cost Oakland $20 million over the next eight years.>
Members of the city council have been pushing for almost a year to rid Oakland of the deal. But Kasaine estimated that it could take another month for the city administrator's office to find an outside firm to investigate fireable offenses by Goldman Sachs. She also said the investigation itself could take as long as three months.
Councilmember Desley Brooks, who has been outspoken about cutting ties with Goldman Sachs, accused the city administrator's office of "dragging its feet."
"We were a leader and could have made some strides," Brooks said of Oakland's effort to drop Goldman Sachs, which gained the city national attention.
Other municipalities around the country were looking to Oakland as an example of a city fighting back against banks that have been accused of manipulating the financial market during the recession. The rate-swap deals that many cities favored before the economic collapse have proved toxic once interest rates plummeted. In Oakland's case, the city is still paying above 5 percent on its debt to Goldman Sachs.
Back in December, the city council had ordered City Administrator Deanna Santana to begin a process known as debarment against the bank, which means the city would essentially fire Goldman Sachs and boycott it from doing business with the city for five years.
Now, five months later, Brooks and other city council members at the finance and management committee meeting on Tuesday expressed their concerns that city staff members had only just started searching for a firm to conduct an investigation.
"When there's a five month delay, and all that comes back is a report about the process that we knew about from the start, its a little disconcerting," Brooks said.
Assistant City Administrator Scott Johnson noted that the report presented on Tuesday had been written back in February, and that city staff had to prioritize its duties.
Though Councilmember Pat Kernighan called Goldman Sachs "a very greedy business that operates without any considerations besides their bottom lines," she also made it know that she was unsure about the benefits of pursuing debarment.
"This seems like an enormous strain on our resources for a very uncertain outcome," Kernighan said.
Kasaine did not give any estimates of the cost of an investigation - all Kasaine said at the meeting was that the city was looking for investigators who "understand financial markets." Johnson also refused to give further details on the process of hiring a financial firm for the investigation.
Source: Oakland Local [http://m.oaklandlocal.com/article/oakland-must-wait-drop-goldman-sachs-city-treasurer-says]