Debarring Goldman Sachs would be huge news. However, Oakland’s bill to prove their culpability is also quite large. Last week, the Oakland City Council approved a $226,000 budget to hire an outside consultant to investigate Goldman Sachs’ controversial rate swap with the city.
The 1998 Goldman Sachs deal with the city, of which, some now say was rigged to fail, will cost Oakland nearly $11 million through 2021. Although, most agree nothing can be done to change the binding contract without incurring even greater costs, the City Council has pushed over the past year to beginning debarment proceedings against Goldman Sachs doing business with the city in the future.
Councilmember Lynette Gibson McElhaney called it a “pretty significant contract” and asked, “What am I getting?” Councilmember Libby Schaaf, who once suggested simply readingRolling Stone to understand Goldman Sachs’ corporate behavior, said, “I was surprised about how much this could costs us.” Both McElhaney and Schaaf even suggested asking attorney’s and financial experts to volunteer time to the investigation. That is not possibly, said an assistant city attorney, since any administrative hearing for debarment of Goldman Sachs would need to maintain its independence and neutrality.
“If you’re balking at the cost now, the cost of debarment will be much more,” added Oakland Mayor Jean Quan. She believes Goldman Sachs’ next move following any debarment proceeding would be to sue the city. “You will be in court a long time. This is pretty serious business.”
Some have charged the city administration with dragging its feet on merely setting the first step toward debarment. Councilmember Desley Brooks has sharply criticized City Administrator Deanna Santana’s office for neglecting to offer timely reports on the issue. As it has bounced around the City Council and committee hearings over the past year since direction was given to seek debarment of Goldman Sachs, a power play between Santana and Brooks over who controls the investigation has ensued. In April, the newly-seated City Council reaffirmed its decision to debar Goldman Sachs while recognizing a role for the Council. Yet, little movement has been made other than last week’s allocation to fund a preliminary investigation.
Successfully debarring Goldman Sachs from city contracts would be a stunning, somewhat symbolic rebuke by Oakland. In the Great Recession-era it would also be unprecedented and potentially mimicked across the country by other municipalities who also believed they were swindled by the financial behemoth.“If we can show Goldman Sachs needs to be debarred,” said Council President Pat Kernighan, who supported the resolution, “I think that would be really significant in the whole country.”
During a meeting last week that appeared to betray Oakland’s standing as an icon of progressivism—the City Council approved funding for a citywide surveillance center and made the possession of makeshift weapons at protests a misdemeanor—the Goldman Sachs issue is a return to pure populism for some members.
Councilmember Dan Kalb said he supports a debarment investigation because “I’m disgusted at Goldman Sachs for what they did to our city and many other cities.” But no member has been stepped up to the Goldman Sachs soapbox more than Councilmember Rebecca Kaplan.
Last week, she urged Washington to get involved in the process. “When we look at the malfeasance of Goldman Sachs, it would be really nice if the federal government took this on. It is really a nationwide issue and the misconduct of these corporations has caused financial devastation throughout the country,” said Kaplan. “I support us moving forward because someone has to step up and say that behavior is not okay.”