City of Los Angeles to vote on forming its own Bank.
Deposits will be needed to balance a $1 billion loan portfolio, but Los Angeles easily has them—now sitting in Wall Street banks having no fiduciary obligation to reinvest them in Los Angeles. The city’s latest Comprehensive Annual Financial Report shows a government net position of over $8 billion in cash and investments (liquid assets), plus proprietary, fiduciary and other liquid funds. According to a 2014 study published by the Fix LA Coalition:
“Together, the city of Los Angeles, its airport, seaport, utilities and pension funds control $106 billion that flows through financial institutions in the form of assets, payments and debt issuance. Wall Street profits from each of these flows of money not only through the multiple fees it charges, but also by lending or leveraging the city’s deposited funds and by structuring deals in unnecessarily complex ways that generate significant commissions.”
Despite having slashed spending in the wake of revenue losses from the Wall Street-engineered financial crisis, Los Angeles is still being crushed by Wall Street financial fees, to the tune of nearly $300 million just in 2014. The savings in fees alone from cutting out Wall Street intermediaries could thus be considerable, and substantially more could be saved in interest payments. These savings could then be applied to other city needs, including for affordable housing, transportation, schools, and other infrastructure.
In 2017, Los Angeles paid $1.1 billion in interest to bondholders, constituting the wealthiest 5 percent of the population. Refinancing that debt at just 1 percent below its current rate could save up to 25 percent on the cost of infrastructure, half the cost of which is typically financing
