Kersten Communications

With the state and local governments facing large budget deficits, a group of community activists and labor and education leaders staged a series of protests on August 10 to deliver a giant $17 billion bill itemizing the ways Wall Street banks are shortchanging California residents and state and local governments. 

The organizers released a report titled, “Wake Up Wall Street: While Californians Must Choose Between Education and Public Services…Wall Street Banks Owe California Billions,” which itemizes the $17 billion owed to California.  The protests, which occurred in Sacramento, Alameda, San Francisco, Santa Clara, Los Angeles, and Fresno counties, were organized by the Service Employees International Union (SEIU) and the Alliance of Californians for Community Empowerment (ACCE).  SEIU and ACCE also authored the report referenced above. 

Kersten Communications provided research support for the report which details how banks and other Wall Street private equity firms have bought major properties in California in recent years, but are not paying the correct amount of property taxes. 

According to a San Francisco Chronicle report, during an August 10 protest at JP Morgan Chase’s offices at 560 Mission Street in San Francisco, protestors demanded to speak with a Chase representative but Chase declined to send a representative to meet with the crowd of approximately 35, whose grievances included unpaid property taxes, the costs to counties associated with blighted residential foreclosures, a decline in small business loans, and lost retirement savings due to reckless investments by financial institutions. 

 “We came here today to get Chase to pay their fair share in taxes…They foreclosed our homes and got government money and put it in their own pockets,” said Dorothy Hicks, a retired nurse from Oakland and member of ACCE, who spoke through a bullhorn outside the downtown San Francisco high-rise, according to the San Francisco Chronicle report. 

“We have all played by the rules…It’s time for banks to do the same,” said demonstrator Veronica Rodriguez out of a bullhorn at an August 10 demonstration in front of a Watsonville Chase bank, according to a report by the Santa Cruz Sentinel.  

Specifically, “under Proposition 13, properties in California should be reassessed at fair market value upon a change in ownership, but loopholes has led to banks skipping out on an estimated hundreds of millions of dollars in property tax revenues,” according to research by Kersten Communications. 

JP Morgan Chase merged with Washington Mutual Bank (WaMu) in 2008 in a deal reportedly worth $1.9 billion, but two years later many WaMu banks and other WaMu assets have still not been reassessed at current property values.  Wells Fargo and Company purchased Wachovia Corp. in 2008 for a reported $15.1 billion in an all stock deal, but many of Wachovia’s California assets have not been reassessed to date.

In a small sampling of properties in just 11 of California’s 58 counties, research provided by Kersten Communications shows that Chase owes an estimated $15.3 million in back taxes to state and local governments.  Statewide, Chase is estimated to owe tens of millions of dollars in back taxes, according to estimates prepared by Kersten Communications. 

A sampling of specific properties owned by Wall Street private equity firms and other corporations are estimated to owe $34.8 million in back taxes.  “These numbers represent just the tip of the iceberg.”  Estimates provided by Kersten Communications show that banks, Wall Street firms and other corporations are conservatively estimated to owe California $51.6 million in just 11 counties for a small sampling of properties.  Statewide, Kersten Communications estimates that banks and corporations currently owe hundreds of millions of dollars in additional property taxes. 

The report also urges banks to “step up to fix the foreclosure crisis” and estimates that the foreclosure crisis has cost California state and local governments $13.9 billion.  “Banks must agree to real and effective loan modification that includes reducing principal; and pay for blight and safety hazards that foreclosures unleash on our neighborhoods.”     

“Big banks like Goldman Sachs, JP Morgan Chase and Bank of America continue to bill taxpayers for millions a year on risky derivatives called “interest rate swap deals,” according to the report.  Since September 2008 banks have profited $1 billion through these deals that have locked local governments in at high interest rates. 

“Before the crisis hit, big banks peddled toxic swap deals to states and cities on the promise that they would be protected against interest rate spikes.  But now that interest rates are near zero, banks are refusing to renegotiate or cancel these deals,” the report states.    The U.S. Department of Justice and Attorney General in California, Florida, and Connecticut are all investigating potentially illegal behavior by the banks in connection with these deals. 

Cities such as Los Angeles, Oakland, and Frenso have filed lawsuits against the banks over interest rate swaps and other municipal derivatives and bank of America has admitted to a criminal violation of antitrust laws.

The report also blames Wall Street’s reckless behavior for devastating Californian’s retirement security.  “Big banks gambled with and lost the retirement savings of hard-working Californians like nurses, college professors, firefighters, and child protection workers.”  Between October 2007 and December 2008, the top 1,000 U.S. pension funds lost $1.75 trillion, nearly are quarter of their value. 

“The losses were no accident,  In several cases, pension funds like the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) have uncovered deceptive and dishonest practices on the part of banks.  CalPERS and CalSTRS have filed class action lawsuits against banks like Bank of America and State Street Corp. to protect retirement security for more than two million Californians,” states the report. 

The report also urges banks to restore small business loans which have been significantly cut back since the financial crisis began in 2008. 

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