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Ira Dember, Communications and Media Director at Commonomics USA, writes the following:
Last November, the Roosevelt Institute published a paper by Saqib Bhatti, “Dirty Deals: How Wall Street’s Predatory Deals Hurt Taxpayers and What We Can Do About It”. This report, sponsored by the Nathan Cummings Foundation, pulled together information on the ways that Wall Street banks and related service providers exorbitantly overcharge America’s cities and towns for financial services and, at the same time, misrepresent complex financial deals as low risk — safe bets — when in fact they are anything but.
Grand Scam. Taken together, these predatory practices are part of the Grand Scam, Wall Street’s systematic and ruthlessly effective draining of massive wealth from taxpayers and from millions of individual families, one household at a time.
LA bleeds cash. Four months before Bhatti’s paper appeared, the Fix LA Coalition published “No Small Fees,” a study of Los Angeles municipal finances. The shocker: while cash-strapped LA doesn’t have enough money to fix potholes, it’s been shelling out $200 million a year in fees to Wall Street banks and predatory service firms.
Chicago’s millions. Four months after Bhatti’s paper hit the streets, in March 2015, analysts examining Chicago’s finances determined that the city and its pension funds could save at least $50 million a year by standing up to Wall Street banks or, in more diplomatic terms, “renegotiating” with these banks. Cost savings would exceed a half billion dollars per decade, a minimum estimate. This, while Rahm Emanuel has been closing public schools for lack of funds.
Big Apple’s lost billions. Another month, another shock: in April, New York City comptroller Scott Stringer announced that over the past decade, the city’s pension funds have underperformed by an aggregate $2.5 billion — roughly equal to the super-size fees that big banks and hedge funds have been raking in to manage the pension money. The real losers may be 715,000 NYC municipal workers and retirees whose retirement checks could potentially come up short for the rest of their lives. The impact of that missing $2.5 billion will be compounded for 20, 30, 50 years into the future. This irony will likely be lost on well-heeled Wall Street perpetrators working right there in lower Manhattan, in the financial heart of, yes, New York City.
It’s everywhere. This municipal ripoff isn’t happening just to the largest cities. Bhatti reports Wall Street is similarly ripping off hundreds of US municipalities plus other local jurisdictions such as school systems and utility districts.
Collective action. In his “Dirty Deals” paper, Bhatti proposes a half dozen ways that municipalities can tip the balance of power back in their favor. These include (a) collective bargaining; (b) performing some financial services themselves; and (c) establishing their own special-purpose banks — public banks, as the State of North Dakota has done with dramatic success.
Commonomics USA is actively supporting Bhatti’s outstanding ideas. We have crafted a resolution now being circulated among cities and towns to help focus municipal administrations on this crucial issue, and to move them toward taking action.