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Credit union flap may reveal Goldman Sachs is bullying community banks

By Muriel Kane
Friday, October 28, 2011 22:30 EDT
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When it was announced recently that Goldman Sachs had withdrawn its sponsorship of the small community bank at which Occupy Wall Street had set up an account for its donations, it appeared to be merely a petty act of vindictiveness.

According to investigative reporter Greg Palast, however, the motivations go much deeper and may involve that Goldman Sachs is misusing TARP bailout funds as a “political weapon” to bully smaller banks.

Back in 2008, Goldman Sachs received $10 billion from the US Treasury under the TARP program that had been established to bail out failing commercial banks. The firm was neither failing nor a commercial bank, but the Secretary of the Treasury at that time, Henry Paulson, was a former Goldman Sachs chairman, and that was sufficient.

There was one catch, however, which was that “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.”

Goldman complied in part by giving $5000 to the Lower East Side Peoples Federal Credit Union for its 25th anniversary celebration — but then threw a fit and demanded the money back when it turned out that Occupy Wall Street was to be honored at the anniversary dinner.

“Peoples’ Chairwoman Deyarina Del Rio,” writes Palast, “tells me that Peoples sees itself in agreement and alliance with the protesters’ demands to radically shift the American finance system away from profit-first to people-first banking. But not with our money, seems to be Goldman’s attitude. But of course, it’s not Goldman’s money but our money – effectively, the tax payer dollars that were supposed to come back in the form of loans in return for the Tarp bailout.”

The heart of the problem, according to Palast, is that the billions of dollars which community banks have received to date under the Community Reinvestment Act have greatly increased their local political influence. Goldman and the other major banks are now determined to hold onto that money and use it to bring these small banks under their sway.

“Peoples’ Del Rio dismisses such threats,” notes Palast, “but I don’t. These Community Reinvestment funds ultimately come from public pockets, so why should the titans of Wall Street be allowed to bully community credit unions, which are answerable to their members, not Goldman’s partners?”

This video is from Democracy Now, uploaded October 25, 2011.

Muriel Kane
Muriel Kane
Muriel Kane is an associate editor at Raw Story. She joined Raw Story as a researcher in 2005, with a particular focus on the Jack Abramoff affair and other Bush administration scandals. She worked extensively with former investigative news managing editor Larisa Alexandrovna, with whom she has co-written numerous articles in addition to her own work. Prior to her association with Raw Story, she spent many years as an independent researcher and writer with a particular focus on history, literature, and contemporary social and political attitudes. Follow her on Twitter at @Muriel_Kane
 
 
 
 
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