OAKLAND CITY COUNCIL | Nearly a year since the Oakland City Council voiced strong support for beginning the process of debarring Goldman Sachs from city contracts, members of the city’s Finance and Management Committee charged the city administrator’s office with dragging its feet, while raising significant doubt a successful case can be made against the financial giant.
“We are no farther ahead than we were five months ago,” said Desley Brooks, who was again critical of City Administrator Deanna Santana’s office. Brooks said she was well aware of the informational report offered during Tuesday mornings committee hearing and claimed in a meeting nearly five months ago, Santana’s assistant, Scott Johnson, assured her the debarment process would soon begin.
“Part of the concern that the community has had is that there continues to be delay because it does not seem as if the city administrator wants to move forward with the debarment,” said Brooks. “So, we continue to delay and not move the process forward.”
The agenda item Tuesday was moved to full City Council with Council President Pat Kernighan abstaining. Brooks will also offer an agenda item to the Rules Committee, she said, that would re-insert the council into the decision-making process for debarment.
Although all former committee members expressed general disenchantment for Goldman Sachs and the rate swap agreement the city first entered in 1998, Councilmembers Kernighan and Libby Schaaf, nonetheless, expressed doubt the city will be successful in extricating itself from the deal with Goldman Sachs.
“They are a very greedy business that operates without regard to anything but their own bottom line,” Kernighan said of Goldman Sachs, but added she believes the swap deal was a “legally enforceable contract.” “It is certainly a bad deal, but a deal the city certainly went into with its eyes wide open.”
“I don’t think we have legal grounds to get out of it,” Kerighan added, although she supports a plan excluding Goldman Sachs from doing business with the city, preferably done without considerable staff time. “The process that we apparently have to go through seems like an enormous drain on our resources for a very uncertain outcome.”
Schaaf agreed. “The debarment process is not in any way likely to get us that $4 million back,” she said of the city’s payment due this year to Goldman Sachs. “That was a contract we entered into, we gambled, we lost and that happens all the time and we have to be grown up about it.” However, if the city’s aim is to make a statement against Wall Street corruption, she said, it must expand the debarment process to other institutions. Doing so, though could might leave Oakland without a bank to borrow from, Kernighan responded.
Councilmember Rebecca Kaplan took a far more populist stance again arguing against the economic injustice by banks “too big to fail” like Goldman Sachs, which many point as the main reason for the Great Recession. While prefacing her remarks by saying, “the problem is much bigger than Oakland,” Kaplan said, “It is important for us to continue to send a message even while recognizing in the long-run it’s going to take more than Oakland to change the situation.”
Kaplan explained the incident as a deal designed by Goldman Sachs in bad faith. “In terms of people, maybe, wondering was it just that a bad deal was made? I think it’s important to know the legal context, which is that a deal was made where Oakland loses if interest rates go down,” said Kaplan, “but then the other party to that deal lobbies for federal action to have interest rates go down. So, it’s like we made a bet and the other side had their thumb on the roulette wheel or whatever metaphor you prefer.”