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.”