L.A. wants to quit or alter two bank deals
Prodded by a nationwide union campaign, the Los Angeles City Council is trying to get out of an arrangement with two banks that was supposed to reduce the city's borrowing costs but instead has increased them by $19 million annually.
City Councilman Richard Alarcon said city officials should refuse to do business with any bank that won't rework the terms of the so-called "interest rate swaps," transactions that were embraced by Los Angeles and other cities over the last decade.Alarcon said he did not believe that the banks involved in the transaction, Dexia Credit Local and Bank of New York Mellon, intentionally sought to harm the city when the swaps were created. Still, he compared the two banks to merchants in the San Fernando Valley who sold water for $20 per gallon in the days after the 1994 Northridge earthquake.
"To me, this is tantamount to gouging," said Alarcon, who represents the northeast Valley.
The City Council followed Alarcon's lead last week, voting unanimously to instruct its financial analysts to ask the two banks to rewrite or cancel the terms of its two interest swaps. Those deals, approved in 2006, cover $316.8 million in debt incurred by a wastewater program that pays for the repair and replacement of sewer lines and sewage treatment plants, according to city officials.
Photo: Alarcon. L.A. Times file