Wednesday, March 26, 2014

How Wall Street Is Sucking Huge Amounts of Money from Los Angeles

From Alternet:  http://www.alternet.org/economy/new-report-reveals-how-wall-street-impoverishes-los-angeles

Finance industry rakes it in from dubious fees.

By Les Leopold March 25, 2014

Los Angeles paid at least $204 million in fees to Wall Street in 2013, and probably significantly more, in addition to principle and interest payments, according to the report, "No Small Fees: LA Spends More on Wall Street than Our Streets." The study, issued today by a coalition of unions and community organizations, shows that due to revenue losses from the “Great Recession,” L.A. "all but stopped repairing sidewalks, clearing alleys and installing speed bumps. It stopped inspecting sewers, resulting in twice the number of sewer overflows." L.A. spends at least $51 million more in Wall Street in fees than it allocates for its entire budget for the Bureau of Street Services.

The researchers caution that the $204 million figure likely underestimates the true amount, because under current disclosure rules, deals made with private equity companies and hedge funds do not have to be publically disclosed. Also, because the city does not list all these fees in one centralized report, hundreds of individual documents must be reviewed to uncover the amounts. As one of the report's researchers stated,
"This is the first time an accounting of fees has been exposed for a specific public entity, and we don't think we have captured it all. So if you do this for every public entity, cities, counties, school districts, states, and universities, transportation agencies and other public entities we could be looking at an astounding amount of money for education and community services money sucked out of the system."
Astounding indeed. My back of the envelope estimate, extrapolating the L.A. experience to the economy as a whole, suggests that the fees Wall Street extracts from public entities could total more than $50 billion a year — enough to provide free tuition at every public college and university in the country.

The coalition offers the following pragmatic reforms that could be implemented quickly.

Continue reading at:  http://www.alternet.org/economy/new-report-reveals-how-wall-street-impoverishes-los-angeles

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