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Eshoo floats TARP payback for local governments

By Josh Richman
Thursday, April 22nd, 2010 at 4:09 pm in Anna Eshoo, economy, Jackie Speier, San Mateo County, U.S. House.

Rep. Anna Eshoo, D-Palo Alto, today introduced a “Restitution for Local Government Act of 2010” to help counties and other public entities get back some of the more than $1.7 billion they lost when Lehman Brothers collapsed in 2008.

Eshoo’s bill would require the Treasury Department to buy Lehman’s assets from these municipalities using profits from the sale of any future Troubled Asset Relief Program assets.

“The purpose of TARP was to prevent the collapse of financial institutions and mitigate the damage of their reckless behavior on the American people. More than 40 municipalities, including San Mateo County in my Congressional District, invested over a billion dollars in the purportedly stable and safe financial products of Lehman Brothers,” she said in her news release. “When Lehman collapsed, San Mateo County and other public agencies across the country were crippled, and we owe them some relief.”

Across California, 28 cities and counties lost a total of about $250 million, with San Mateo County’s loss by far the biggest – $155 million between the county, its cities and its school districts – resulting in teachers being laid off, road and school repairs being canceled, and construction of new buildings being halted. A report commissioned by the county estimated more than 1,500 jobs were lost or not created because of the loss of taxpayer dollars.

The East Bay saw losses too, including Alameda County’s $5 million and Fremont’s $4 million.

“By selling TARP assets, the federal government has already made more than ten times the amount of money that public institutions lost when Lehman collapsed,” Eshoo said. “My legislation will require the Secretary of the Treasury to provide relief to these institutions with any future profit.”

The Treasury Department has earned $15.4 billion from dividends, interest, and the sale of bank stock which it bought through TARP, and expects another $7.5 billion from the sale of its 27-percent stake in Citigroup. Eshoo’s bill would use some future TARP profits to buy up Lehman securities, bonds and other instruments held by dozens of local governments across the nation when the global financial-services firm went belly up in 2008. Local governments receiving these funds would have to report back to the federal government on how the money is used and to show job creation, retention, and economic activity equal to the amount of funds they received.

Rep. Jackie Speier, D-Hillsborough, is the bill’s first cosponsor. “Lehman Brothers’ financial practices were mired in deceit and deception,” Speier said in Eshoo’s release. “The ensuing investment losses have fallen directly on the shoulders of my constituents who have to bear the burden of reduced educational, health and public safety services. It is imperative that this measure be enacted to protect the welfare of residents of all the municipalities stung by the Lehman Brothers’ shell game.”

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  • RR, Uninvited Columnist

    Gotta hand it to these Real House-wives of DC! Honest, trusting local gov’ts lose money on Wall St and they should be reimbursed. Golly, how about private investors?

  • Josh Richman

    Point taken, RR, but for argument’s sake: Aren’t taxpayer dollars actually private dollars that have been converted to public use, to fund your schools, your roads, your public buildings and so on? And shouldn’t local governments try to recoup some of those lost dollars from the federal government, bring them closer to home to actually benefit local residents during this time in which city and county budgets are so tight? People have been saying for a long time now that there should’ve been a Main Street bailout instead of a Wall Street bailout; wouldn’t this qualify?

  • RR, Uninvited Columnist

    It’s a circular argument. In California big private incomes provide the bulk of tax intake. Smaller incomes, less tax revenue.

  • Josh Richman

    OK, but this is money already collected as taxes by the feds, then doled out (for better or worse) to prop up failing banks, now coming back with interest; why shouldn’t it be re-used to help struggling localities, where it’ll be spent on “closer-to-home” services for the people who paid the federal taxes in the first place? (I hope you don’t think I’m screwing around with you here, I just think it’s an interesting conversation.)

  • Ralph Hoffmann, Self-Invited Columnist

    “The government that governs best is that which is closest to the people.” Guys: If this money had been kept local in the first place, there would have been no oportunity for government employees, earning 6 figure incomes, to occupy their work hours watching hard-core porn, while the economy crashed.

  • http://www.foxblows.com Floxblows

    Republicans met with Goldman Sachs and Jp Morgan Lobbyists during Obama’s Speech

    While President Obama begged Wall Street to play along with financial regulatory reform, Senate Republican leaders hobnobbed with lobbyists at a lunchtime fundraiser. Ostensibly, the fundraiser was for Sen. George LeMieux, the Florida Republican appointed by Gov. Charlie Crist to keep the seat warm for Senate candidate Charlie Crist. LeMieux is not running himself. ThinkProgress bloggerLee Fang noticed that LeMieux rolled up in a car with a Crist bumper sticker. Also spotted: Sen. John Cornyn; Sen. Richard Burr; and superlobbyist Charlie Black.

    No sign of invitees Mitch McConnell or John McCain, but it’s possible they somehow escaped the notice of the several reporters staking out the front door. The Democratic National Committee sent a camcorder guy who seemed to be zooming in on every single person who entered the building. The lobbyists mentioned on the invite boast a wide range of clients, including many in the financial services industry.

  • http://www.foxblows.com Floxblows

    Our schools have no money
    And its not funny.
    Plenting of dough for Guns, Spaceships and Banks
    Voting for a Republican or Corporatist Democrat?
    NO THANKS!

  • Litl Bits

    Don’t accept the drivel you’re hearing….our schools have TOO MUCH MONEY…but it’s going to the wrong places! GET RID of teachers’ and other unions in schools…they are bleeding the system dry! the more they get, the worse the performance…have you noticed that? those schools who have the highest per student expenditure have the poorest ‘performance’! private schools spend a fraction per student – and get far higher performance scores….better test grades, etc…too much on “administration” that does nothing to educate…no discipline in schools? how can you teach without discipline? – you CAN’T! Learning discipline and self-control is urgent part of learning…without it, kids can’t learn anything else!

    Look at REALITY!