How Badly Did Goldman Screw The City Of Oakland?

Matt Levine of Dealbreaker fame writes: Oakland has been fighting with Goldman Sachs over an interest rate swap for a while and I’ve always thought it’s a little embarrassing to talk about. Obviously Oakland’s theory – “we entered into a bet, and we lost, so we want to pretend it never happened” – is pretty silly, but it’s like, yeah, Oakland has it rough, and Goldman has it less rough, so just give them some money, no?

Oakland is trying to get out of a Goldman-brokered interest rate swap that is costing the cash-starved city some $4 million a year. The swap, entered into 15 years ago as part of a bond sale to hedge against rising interest rates, has turned sour for Oakland now that interest rates are near zero. … Oakland is paying 5.68 percent on debt associated with the swap, even with interest rates at record lows. Getting out of the contract would cost the city $16 million in termination fees, it says; it wants Goldman to waive the termination fees. …

But at Tuesday’s protest, civic leaders said the bank had benefited from a government rescue package during the 2008 financial crisis, and now it should give a break to cities like Oakland.

To really buy into Oakland’s case you have to think that this swap deal was somehow unfair when it was entered into.* But it doesn’t sound like Oakland is saying that…..

Find out more at http://dealbreaker.com/2012/08/how-much-did-goldman-screw-the-city-of-oakland-anyway/