Between debating the location of a proposed dog park and discussing taxi permit fees one night last month, the city council in Oakland, California, turned to severing ties with Goldman Sachs Group Inc. (GS)
The vote for the city administrator to begin the process of firing the fifth-biggest U.S. bank by assets came during an eight-hour meeting Dec. 18. It culminated months of efforts by the city to exit a 1998 interest-rate swap without paying a $14.8 million termination fee. Goldman, which underwrote $83 million of Oakland debt last year, has denied the request.
The cash-strapped city addressed about $318 million of budget gaps in the last six years. It is moving toward the rare step of cutting off business with the bank that sold it a bet on interest rates that wound up backfiring. Issuers including California’s water resources department and Reading, Pennsylvania, have paid at least $4 billion to banks to end such contracts after the deals failed to protect them from changes in interest rates.
“I’m sure Goldman Sachs does not relish the possibility of losing the ability to do investment banking business with the city of Oakland,” said Robert Fuller, principal at Capital Markets Management LLC, a Hopewell, New Jersey-based swaps adviser to municipalities.
Tiffany Galvin, a Goldman Sachs spokeswoman in New York, declined to comment.
Incoming search terms:
- eagle scout emblem