Saturday, April 24, 2010

A Hit Piece

The Los Angeles Times has an extraordinarily nasty article on Democratic gubernatorial candidate Jerry Brown today. The headline and the lede blast the current state Attorney General for his ties to Goldman Sachs dating back to when he was mayor of Oakland, California.

Skipping below the lede, however, the article cites facts which make it clear that the "tie" is actually quite tenuous, so tenuous that one wonders why the article was written in the first place:

Brown, a Democrat and California's attorney general, also has connections to Goldman, which was charged with civil fraud last week by the Securities and Exchange Commission. The links are his sister and a complicated financing deal made by the city of Oakland, where he served as mayor for eight years.

That deal, known as an "interest rate swap," was supposed to guarantee Oakland stability in its debt payments but is now costing the cash-strapped city $5 million a year. The agreement, which goes until 2021, has an estimated cancellation cost of $19 million. The city is trying to renegotiate it, and union officials representing government employees are calling on Goldman to let Oakland and other municipalities out of such agreements.

The swap, like those entered into by many governments, began in 1998, the year before Brown took office. City officials renegotiated it in 2003, right before his sister, Kathleen Brown, the former state treasurer, began working for Goldman as the West Coast head of municipal finance. In 2005, when the city paid off the debt Goldman had arranged, it left the interest rate swap in place.

You will note that the original deal was entered into before Mr. Brown became mayor, and that many municipalities entered into these arrangements, not realizing at the time just how dangerous such interest swaps would turn out to be. When the deal was renegotiated, which was during Mr. Brown's tenure, he wasn't directly involved in the process. His sister, who had her own political career, got a job with the firm at some point after the deal was finalized.

Well, slap my face and call me Fannie.

To be fair, the article does mention towards the end that Mr. Brown's probable opponent in November has a few connections to Goldman as well:

Goldman is already a campaign issue. Whitman, the billionaire ex-chief of EBay, has had extensive ties to the company. Her name surfaced at the center of a national financial scandal in 2002 when congressional investigators cited a deal she arranged with Goldman that gave her early access to initial public stock offerings.

Experts said the deal was a conflict because Goldman was seeking millions of dollars in banking business from EBay at the time, and the profits Whitman netted arguably belonged to shareholders. Whitman had a seat on the Goldman board when the scandal broke and resigned soon after.

Bounds downplayed Whitman's time on the board, saying it was for "15 short months nearly 10 years ago." He said she would end her investments in Goldman Sachs if elected," and isn't "some kind of Wall Street banker."
[Emphasis added]

Now, let's just examine the equivalency implied by this hit piece. Jerry Brown inherited a deal made by Oakland before he became mayor, was mayor when the deal was renegotiated (which, by the way, did benefit the city to some extent at the time) although he wasn't directly involved in the negotiation, and his sister, who had been State Treasurer, got a rather nice job with Goldman Sachs sometime thereafter.

Then there's Meg Whitman who, in exchange for some banking business from eBay, got early notice from the banking firm of initial public offerings. Then she sat on the firm's Board of Directors for "15 short months" (15 Februaries?) and only resigned because of the clear conflict of interest noted by the scandal.

One of these things is not like the other no matter how you look at it, but LAT has now smeared Jerry Brown with the Goldman tar.

Heckuva job.

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Anonymous grrljock said...

I'm not enthusiastic about Jerry Brown by any means, but I agree with you, this is an obvious smear. I remember just reading the headline in my local paper (Oakland Tribune), which stated something like "Whitman, Brown have ties to Goldman" and feeling my reflexive cynicism kicking in.
Since I'm not a US citizen (yet, maybe...) and hence can't vote, this "article" won't change anything for me, personally, but I wonder how much doubt it sows in those still undecided?

10:22 AM  

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