David Sirota: How Wall Street Financial Fees Choke Our Cities

from In These Times:


How Wall Street Financial Fees Choke Our Cities
L.A. is on the hook for millions of dollars in the same scheme that has plagued cities across America.

BY DAVID SIROTA


When a city is forced to spend more on Wall Street fees than on basic public services, it is the sign of trouble. When that city is one of America's biggest population centers, it is the sign of a burgeoning crisis.

That's the key takeaway from a recent report looking at what has been happening in Los Angeles over the last few years. Published by the union-backed Fix LA Coalition, the report details how the city has slashed its spending in the wake of revenue losses from the Wall Street-engineered financial crisis. Yet, as the analysis shows, the city is nonetheless still being crushed by Wall Street —in this specific case, it is being forced to spend $300 million a year on financial fees. For some context, that's more than the city spends each year maintaining all of its roads.

So what specifically are these fees? According to the data, roughly $200 million worth of fees go to Wall Street money managers who oversee some of the city's pension investments. Yet, that's only a conservative estimate gleaned from analyzing documents that are publicly available. Because there’s no one central accounting of the fees, and because other fees may be secret, the report notes that, just like in most locales, “neither the boards nor the investment staff employed by the boards know (exactly) how much they pay in total fees.”

Moving forward, Los Angeles is now on the hook for $65.8 million worth of new fees in the next 14 years, thanks to a 2006 interest-rate swap deal.

“(Those) deals were sold on the assumption that they would save L.A. taxpayers money,” notes the report. “But after the banks crashed the economy, the federal government drove down interest rates as part of the bank bailout, and now the banks are reaping a windfall at taxpayers’ expense.” .................(more)

The complete piece is at: http://inthesetimes.com/article/16667/wall_street_financial_fees_choke_american_cities