Pennsylvania City Passes First Glass-Steagall Resolution; Outrage At Wall Street Grows
June 12, 2010 • 4:05PM

At its regular monthly meeting on June 9, the Borough Council of Lansford, Pennsylvania unanimously adopted the LaRouche PAC resolution, "To Save Our Nation, Congress Must Pass Glass-Steagall and Shut Down Derivatives Now!"

Lansford (in Carbon County) is in the heart of the old anthracite coal country of northeastern Pennsylvania, and is the home town of the current speaker of the state House. The Council is sending official copies to the local Congressman and to the two U.S. Senators, plus Cantwell, McCain, and Lincoln, and is also putting out a press release in the area.

The resolution was adopted on the initiative of the Council President, a Republican, who has been closely following LaRouche since we contacted him around the HBPA in 2007. The Council passed an HBPA resolution at that time by a vote of 6-1, and our contact expected at least two Council members to vote "no" this time, because those two are usually contrary to everything he does. He reported that when he read the resolution at the meeting, council members and the audience, who had been pretty bored up to that point, suddenly came to life, started vehemently agreeing as he read it, and the vote wound up 7-0 in favor.

This Council President told us last week, "I just recently figured out derivatives, and they have no place in our economy." He was responding to the scandal over derivatives that has erupted in Pennsylvania, after the state Auditor General released a report last November showing that 107 out of 500 school districts, plus 86 local governments and other agencies such as the Turnpike Commission, have been bamboozled out of tens of millions of dollars by Wall Street firms which convinced them to engage in interest rate swaps. The scandal exploded after the Bethlehem area school district admitted to $10 million in losses, and was forced to raise property taxes. This is also a factor in the bankruptcy crisis facing the city government of the state capital, Harrisburg.

The state Auditor General, Jack Wagner, has issued a blistering series of press releases demanding that swaps and other "toxic instruments" be banned. The following are excerpts of recent releases:

"'We continue to find examples of hard-earned taxpayer dollars going to Wall Street," Wagner said. "Money that should be invested in students, classrooms, and fixing infrastructure in Pennsylvania is instead lining pockets on Wall Street. State and local government must stop gambling with public money....

"The true extent of potential losses to taxpayers remains unknown, but could be catastrophic.... Most recently, Wagner found that the Pennsylvania Turnpike Commission had more than $2.23 billion in debt tied to 26 active interest-rate swaps, according to its most recent financial statements. If the Turnpike Commission had to terminate all of those swaps, it would lose $145.7 million, which is equivalent to almost three months of turnpike toll revenue....

"'There is overwhelming evidence of how dangerous these financial schemes truly are,' Wagner said. 'Swaps have no place in the public sector. I urge Pennsylvania taxpayers to join the call to ban these toxic instruments.'...

"A special investigation by the Department of the Auditor General determined that 107 Pennsylvania school districts and 86 local governments had financed $14.9 billion in debt tied to interest-rate swaps, and that one school district—Bethlehem Area, in Lehigh and Northampton counties—had lost at least $10.2 million in swaps.

"As a result of his investigation, Wagner has asked the General Assembly to repeal Act 23 of 2003, which permitted Pennsylvania school districts and local governments to enter into interest-rate swaps, and to expressly prohibit the use of such instruments by school districts, local governments and municipal authorities."

Meanwhile, 40 miles south of Carbon County, in Lehigh Valley, the former steel center of Bethlehem-Allentown, LaRouche PAC representatives found that outrage at the Wall Street rip-off of the local Bethlehem Area School District, immediately translates into enthusiastic support for our Glass-Steagall mobilization. (The school district includes five municipalities in two counties, including the city of Bethlehem.)

One school board member exclaimed (in endorsing the Glass-Steagall resolution), "We have to bring sanity back to Wall Street!" He reported that the total the district is losing in interest rate swaps (derivatives) is not $10 million, but $15-16 million, and that because 80% of the district's bonds are variable-rate, they cannot re-invest in bonds that can be used for construction; i.e., the district's money is being held captive in order to ensure more for Wall Street! He also suggested local anti-tax activists to call. (The district is being forced to lay off almost 40 teachers, and raise taxes 6%.)

Another local official was even angrier: "We were raped!" She plans to circulate the resolution widely, and mobilize everyone she can, on the local and state level, to call or e-mail Senator Casey and local Congressmen. She reported that JPMorgan Chase and Morgan Stanley had blatantly lied to the school board ("This is very low risk: You have virtually fixed interest rates!"), and then later bragged that the state law Wall Street had lobbied to be passed, gave them the right to lie and deceive; and the district had no legal recourse! In support of our drive to shut down all derivatives, she pointed to the study done by Auditor General Wagner, that Wall Street had lured the board into reckless gambling with the publics money without their even knowing it, and pointed out, Atlantic City and Las Vegas are a lot more regulated than Wall St.

A local official who had supported the HBPA, and is also a Bethlehem high school teacher, said "Everyone is angry—teachers, parents, taxpayers." She had already seen an e-mail of the resolution, will pass it on, and suggested leaders of several groups for us to contact.

Meanwhile, a supporter, a retired engineer who was recently elected to the state Democratic committee (he was not endorsed by the Party, and talked to everyone about LaRouche), has decided to introduce the Glass-Steagall resolution at the Democratic Party state meeting coming up next weekend, where Trumpka is the featured speaker. He has e-mailed the resolution with a personal cover letter to the state chair and executive director.