Goldman Sachs’ decision to withdraw its support from the LES People’s Federal Credit Union has garnered a lot of media attention in the past week. Today in the Guardian, there’s an interesting follow-up to the story — an investigation by journalist Greg Palast for “Democracy Now.”
As you may have read, Goldman took back a $5,000 donation towards an upcoming fundraising dinner due to the credit union’s support of Occupy Wall Street. Palast reports:
…there’s a lot more at stake in this battle than a $5,000 donation gone wrong. Underneath, it’s a battle royal for control of tens of billions of dollars in government mandated “community reinvestment” funds. In 2008, the US Treasury handed Goldman Sachs a check for $10bn from the Troubled Asset Recovery Program (Tarp), the bailout funds given to desperate commercial banks. A few eyebrows were raised: Goldman was not desperate, and it certainly was not a commercial bank. Yet – abracadabra! – Secretary of the Treasury Henry Paulson transformed investment bank Goldman into a commercial bank overnight… But there was a catch: Goldman would have to return a chunk of the public’s billions in the form of loans for low-income customers and members of its “community”, as required by the Community Reinvestment Act (CRA) of 1977. Problem: Goldman has, it seems, no low-income customers, nor a “community”. Goldman was directed to find poor people and a community and hand over some cash. So Goldman looked down from its riverfront tower in lower Manhattan and discovered Peoples. Over 80% of Peoples member-owners have low incomes. At least 65% are Latino. For the big money-center banks, the CRA is good deal. They pay some blood money into community banks and offload their low-income customers. Indeed, bank branches catering to the carriage trade often hustle would-be customers from housing projects out the door with an admonition to take their undesirable business to Lower East Side Peoples.
Click on the video above to watch the complete story.
And have a look at financial blogger Felix Salmon’s take on this story. Hint: he is not very impressed with Palast’s reporting.