A controversy in the banking community has arisen around the Occupy Wall Street movement. Greg Palast investigates the story behind Goldman Sachs’ recent decision to pull out of a fundraiser for the Lower East Side People’s Federal Credit Union in New York City after it learned the event was honoring the protesters at Occupy Wall Street. The investment bank withdrew its name from the fundraiser and also canceled a $5,000 pledge. Was the $5,000 a Goldman Sachs donation or actually American taxpayer bailout money Goldman set aside for community banks?
Greg Palast, investigative reporter with the BBC and author of the books Armed Madhouse and The Best Democracy Money Can Buy. His next book, out in November, is called Vultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores.
Amy Goodman: We turn now to a controversy in the banking community around the Occupy Wall Street movement. Recently, the financial giant Goldman Sachs pulled out of a fundraiser for a small Lower East Side bank that caters to poor people after it learned the event was honoring the protesters at Occupy Wall Street. The investment bank withdrew its name from the fundraiser and also canceled a $5,000 pledge.
But did Goldman Sachs actually use U.S. taxpayer bailout money to attack Occupy Wall Street’s not-for-profit community bank? Investigative reporter Greg Palast filed this report from Wall Street.
Greg Palast: Downtown New York, near Wall Street, these are the towers of Goldman Sachs, the mega-bank. With over $933 billion in assets, nearly a trillion dollars, Goldman has declared war on one of the smallest banks in New York City.
The story begins here at Occupy Wall Street. It all started here, with these buckets. Unexpectedly, the donation buckets were filling up with thousands of dollars in cash, and the anti-bank protesters suddenly needed a bank.
Bobby "Bailout": We basically started out here just thinking we were going to a protest, and maybe some people would come out. Then, very soon, we were collecting large amounts of donations, and we were in way over our head.
Greg Palast: Occupy Wall Street chose to bring their bucket of bills to the nearby Latino neighborhood. This is New York’s Lower East Side, and this is the not-for-profit community bank, Lower East Side People’s Federal Credit Union.
Inside, the bank was serving lines of residents from housing projects, bodega owners, other locals, most of whom had been refused service by the big commercial banks. In their cramped back office, the only space to speak with the bank’s leader was inside their vault.
Deyanira Del Rio: So this is our old-fashioned safety deposit boxes that many of our members still use.
Greg Palast: People’s Credit Union chairwoman, Deyanira Del Rio.
Deyanira Del Rio: So, our membership is 80 percent low income, approximately, and we also have about, I would say, 65 percent or so of our members are Latino.
Greg Palast: What makes you different—
Deyanira Del Rio: Right.
Greg Palast: —from Capital One or Goldman Sachs—
Deyanira Del Rio: Yeah.
Greg Palast: —or any of the other big, giant banks?
Deyanira Del Rio: We started off when the last bank branch in a hundred-block radius of the neighborhood was closing its doors. And community residents came together to initially protest the closure of that bank, and ultimately did something very different, which was start their own institution, an alternative to the mainstream bank.
Greg Palast: They’re holding a dinner next week, and they’ve announced they’re honoring their new big member owner, Occupy Wall Street, to celebrate Occupy’s call for its supporters to move their money out of big banks to people’s and other community banks.
Undercover Police Officer: You were inside with everybody else.
Customer: I’m a customer. I’m a customer.
Witness 1: She is a customer.
Customer: I’m a customer.
Undercover Police Officer: You were inside. Yes, but you were inside with the whole—no, no, no.
Witness 2: What are you doing?
Witness 1: Hey, what the—hey!
Witness 3: What are you doing? What are you doing? What are you doing?
Greg Palast: Twenty-three protesters protesters were arrested at a branch of Citibank following the call to move their money.
Witness 3: Oh, my god! This is wrong! This is wrong! This is wrong! What you’re doing is wrong! This is wrong!
Greg Palast: And Goldman Sachs, which had donated $5,000 to the credit union, threatened legal action over the little bank’s honoring Occupy Wall Street. When the credit union refused to back down, Goldman took back its $5,000. The credit union members we spoke with backed their little bank.
Lyle Walford: I mean, it was a courageous thing to do. It’s their saying, that "We have members who are part of us. We are part of the community. We are people-oriented. We are the people’s institution, not the money’s institution." So, yes, I think it was a great thing for them to do.
Greg Palast: We waited all day and night for an answer to our calls to Goldman.
Were you trying to threaten the credit union for its support for Occupy Wall Street? We’re waiting outside your building.
Back at the Wall Street occupation, a street performer showed Goldman’s system of the old give-and-grab-back.
Street Performer: There you go, buddy!
Greg Palast: Thank you.
Street Performer: For your boys. All right, all right, take care. Make sure you spend it the right way. Adios. Excuse me, I want my money back, please. Give me back my money!
Greg Palast: Oh, no!
Street Performer: Give me back my money!
Greg Palast: From the Occupied territory, Wall Street, New York, this is Greg Palast for Democracy Now!, news for the 99 percent.
Amy Goodman: Greg Palast, investigative reporter with the BBC, author a number of books, including Armed Madhouse, The Best Democracy Money Can Buy. His new book, out in November, is called Vultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores. We are joined by Greg Palast right now.
Continue to explain what exactly happened.
Greg Palast: It’s not about $5,000 donation. First of all, it’s not a donation. The issue is about a multi-billion-dollar battle over TARP money and the finance community. Back in 2008, Goldman Sachs, which is an investment bank—that meant that all their losses were there—was turned into a commercial bank, within 24 hours, so they could qualify for $10 billion in bailout funds. But as part of the deal—as part of the deal, Amy—
Amy Goodman: And explain commercial bank.
Greg Palast: OK, commercial bank is the types where you put in your savings, and we, the taxpayers, and the government guarantees the profits, or guarantees the solvency of that bank. So, for Goldman to get into the $10 billion—to get their $10 billion check for bailout, they had to become—go from a gambling house, an investment bank, into a nice commercial bank. But they had to agree that they would then be subject to what’s called the Community Reinvestment Act and return some of that money, a chunk of it—most banks put in a billion dollars—return a chunk of it back into low-income communities. Well, Goldman doesn’t have any branches, so they gave money to the designated low-income bank of New York, Lower East Side People’s Federal Credit Union, and—but they’ve been giving out the money in eyedroppers, like this $5,000. Now remember, it’s not a donation. It’s a required payment under the law that they got in return for our $10 billion, OK? So it’s not a donation. This is mischaracterized. It’s a payment required by law, with an eyedropper.
But what they are doing is starting off something very dangerous and new, which is to say—there are literally tens of billions of dollars in these funds for community reinvestment, boosted by the bailout funds. They see this as a political weapon, as a hammer to control the political discussion. These community development credit unions have been joining the Occupy Wall Street movement nationwide. It’s about moving your money from the big banks to the small banks. And they’re not worried about losing little deposits. What they are worried about is losing political control of the discussion. Right now, people like Paul Volcker are calling for removing the rights of banks like Goldman, now a commercial bank, to stay in the gambling trading business. Well, Goldman is very much afraid of that. So the Occupy Wall Street movement has put back on the table these issues of bank deregulation, these issues of community reinvestment.
And Goldman, I think they’re actually quite smart. They figured out, "Well, we’ve got—there’s like a hundred billion dollars on the table here. Why don’t we start saying, ’You’re not going to get any of it unless you dance to our tune?’" And I have to tell you, from inside, it wasn’t minor. It wasn’t just, "Oh, take—give us back our donation money." It was legal threats saying, if you—you cannot—if you’re going to get our money, you may not back Occupy Wall Street and the "move your money" movement, without getting approval from us at Goldman Sachs. That’s a whole new business. So, it’s very dangerous, because it involves billions of dollars in public money. It’s not Goldman’s money. It’s our money. And that’s what they’re doing with it.
Amy Goodman: And explain the significance of this credit union.
Greg Palast: Well, the Lower East Side People’s Federal Credit Union, and I—listen, my ex is the CEO, and so I hope she’s not mad at me doing this report. But I’ve got to tell you, Lower East Side People’s Federal Credit Union has been designated by federal charter to be the bank for all New Yorkers of low income, if you own—if you earn less than $38,000 or work or live on the Lower East Side. What’s happened is, is that the big banks give Lower East Side a few dollars and then send all the poor people to that bank. You walk in poor, you say, "I’m in a housing project and on public assistance," "Oh, go down to Lower East Side." So they dump the poor there. They can’t even open bank accounts, let alone get loans at these big banks. So it’s a dumping ground so that the—it’s a brilliant bank. It does very well, and it serves all the entire poor community of New York. It’s got branches in Harlem.
But what the banks now want to do is say, as this bank is growing not only as an economic force, but a political force, in the low-income communities in New York, and they are being used as the model nationwide, they are taking a political stance, saying, "We honor Occupy Wall Street, because we are against people putting their money in these commercial banks. It’s time that banking become for the people, not for the money." And that message is a no-go with the banking community.
So it’s not, by the way, just Goldman Sachs. Capital One said, "Take our name off." You’ve had basically Goldman has started a kind of run on low-income banks that will associate with Occupy Wall Street. This is a dangerous use of public money. I’ve got to emphasize this: it’s TARP money, that is bailout money that we gave these banks in 2008. They were required, as part of the deal—in Goldman Sachs’ case, explicit—that they give back some of the money to low-income communities and reinvest there. It’s our money. It’s not a donation. And this is just little bits. And they’re withholding these payments. I haven’t seen Goldman put out—they’ve put out less than half a cent on the dollar we gave them, the lowest of any bank. But they are setting a—they’re basically setting a course that all of the other banks are now following, saying, "Hey, you want our money? You have to clear your political positions with us at the big banks." This is a very dangerous new business. And I hope that with this report here on Democracy Now!, that the regulators are going to step in and say, "No, no. This is not your money. This is our money. This is not a political weapon." It’s a very dangerous new thing that the banks are doing.
Amy Goodman: You tried to speak to Goldman Sachs.
Greg Palast: Boy, we tried to speak to Goldman. We actually staked them out, if you saw me at night in front of their big office buildings just outside Wall Street on the West Side Highway. So we’ve tried. They won’t speak to us, at all. They certainly won’t speak to Democracy Now! They gave a good spin of a little story that went on the front page of the Wall Street Journal about, "Oh, this little credit union, they were slapping us around by taking our money and then backing Occupy Wall Street." It’s not about that. It’s about the billions of dollars at stake with community reinvestment funds, out of the bailout money, and who has political control.
Amy Goodman: You’re not just a journalist, Greg. You started off in finance. You got your degree in finance.
Greg Palast: Yeah, believe it or not. I was a protégé of a little guy named Milton Friedman. Pretty strange stuff. Yeah, and I was—
Amy Goodman: University of Chicago.
Greg Palast: And before I was a journalist, as an investigative journalist, I was actually an investigator. And then I said, no one is putting out the news of the real stories, so maybe I’ll do something for U.S. news, and ended up having to leave the country, work for BBC.
Amy Goodman: So, what do you think has to happen right now?
Greg Palast: What has to happen right now is that the regulators in the Obama administration, the Federal Reserve Board, has to step in and tell Goldman, "No, it’s not your money. You may not use the community reinvestment funds as a political hammer to beat up the small community groups, credit unions, community banks, to which you’re giving this money." It’s a very dangerous thing to be saying, "We’re going to be giving out money based on your political positions and based on whether you are telling people that the banking system has to change," because community banks like Lower East Side People’s Federal Credit Union are taking the position that the commercial banking system is rotten and should be replaced by a people’s banking system. So it’s not just—they don’t want to be the little safety valve, "Just send us your poor people." They want to replace the banking system. And believe me, Goldman, and the other banks following them, don’t want to hear that message.
Amy Goodman: Greg Palast, I want to thank you for being with us. We will continue to talk to you. His new book coming out just in a few weeks is called Vultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores. Thank you very much.