Explaining Southern California's economy

Why Oakland vs. Goldman Sachs is an interest-rate mess

Earns Goldman Sachs

Richard Drew/AP

The price of Goldman Sachs stock is shown at a trading post on the floor of the New York Stock Exchange. The Wall Street bank is fighting with Oakland about a deal that goes back to the late 1990s.

If you want to engage in a nice, deep dive into the murky depths of municipal finance, investment banking, and the post-financial crisis world of rock-bottom interest rates, then you're going to want to spend some time getting to know a dispute that's been brewing between Oakland and the Wall Street investment bank that everyone loves to hate, Goldman Sachs. 

The Financial Times has been covering the fracas. But I'll break it down to a few bullet points:

•15 years ago, Oakland did a deal with Goldman to buy interest rate swaps, a type of financial derivative, as insurance against interest-rate volatility on bonds Oakland had issued.

•The bonds in question were commonly used before the Great Recession, but since then cities have gotten rid of them, refinancing the variable-rate debt into fixed-rate debt. But Oakland's swap deal with Goldman runs through 2021.

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