By Santa Cruz County Supervisor Ryan Coonerty.
As elected officials, city managers, department heads, and other public servants, we require our bidders on public contracts to be “responsible and responsive.” Under this standard, we would not hire a firm to build a community center, repair a water main or even chlorinate our public pool if it had just pled guilty to federal criminal charges.
Despite this, many of us continue to do business with big banks that continue to break the law even after years of criticism and increased regulation following the economic crisis. On May 20th, four major banks – Citigroup, JP Morgan Chase, Barclays and Royal Bank of Scotland – agreed to plead guilty to felony criminal charges and pay $5.5 billion in fines for conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange spot market. A fifth, UBS, pled guilty to fixing the exchange rate, affecting consumer credit cards, student loans, home mortgages and much more. US Attorney General Loretta Lynch observed that the banks engaged in a “brazen display of collusion.”
I feel strongly that Santa Cruz County should not be involved with banks that rigged the world’s biggest financial markets. These banks have acted as though they are above the law, and we must send a message that if they want to do business with local and state governments then they must play by the rules to which we hold all other businesses with which we contract.
That’s why, at my urging, the Santa Cruz County Board of Supervisors voted to direct that the County’s investment policy be modified to reflect that our county will not do new business (using investment services, buying commercial paper or bonds) with these felonious financial institutions for a period of five years and further that the County unwind its approximately $650 million investment portfolio from existing relationships with these five banks to the greatest extent feasible.
This isn’t about politics; this is simply the most responsible thing we can do as stewards of public funds. In my role as County Supervisor I am entrusted to set an investment policy that protects the public’s tax dollars. The actions of these banks pose risks to investors and the public, and I do not believe that these banks can be trusted with public funds.
Although these banks’ actions undermined the integrity and competitiveness of the hundreds of billions of dollars’ worth of international commerce that circulate daily, the response to their felonious behavior was not much. The stock price of these companies went unchanged and, once again, unlike the millions of people who get caught stealing a fraction of what these banks stole, no one seems to be going to jail.
Federal institutions of justice and regulation have clearly failed to create any sense of accountability for these banks, instead letting them go with slaps on the wrist. When the national government is unable or unwilling to protect us from this kind of dangerous behavior, we have to take initiative as local governments to craft our own solutions to these problems. While the loss of Santa Cruz County’s investment pool alone may not have a major impact on Wall Street, I am actively reaching out to other local jurisdictions across the country to urge other institutions and local governments to consider taking similar action in order to send a message to Wall Street.
With local governments leading the way, we can act as the famed “laboratories of democracy” to take action when the federal government has been unsuccessful. Perhaps the loss of public sector business will finally encourage the responsible behavior by Wall Street that regulation and shame have thus far sadly failed to instill.