Grace Ross: How to Solve Worcester’s Public Transportation Problems

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Thursday, April 12, 2012

Grace Ross, GoLocalWorcester MINDSETTER™

We talk so much about the role of the big mortgage companies, subprime mortgages, and how the banks are hurting our communities through foreclosures, that sometimes we miss how much the rampant rush for profit by huge sectors of the financial industry, not just in the U.S., but across the world, is continuing to damage our lives. Yet, they are still thriving on trillions of tax-payer guaranteed dollars.

Recently, a lot of people have focused concern in Boston on the cuts to public transportation, the MBTA and increases in fares. Of course, those of us in Worcester know this is just the tip of the iceberg. We’ve been trying to fight cuts in our regional transit system for years; going to hearings at the State House, talking to people. We have residents who can no longer get to jobs and have had to leave work, or not get to medical appointments, because our transportation system has been cut so threadbare.

Cutting public transportation is a bad choice financially because, once again, it is cutting back on our ability to function as a local economy, which we cannot afford, now of all times. Public transportation also cuts down on our dependence on foreign oil and, looking at our bizarre weather, we are reminded it saves on pollution as well.

What caused the financial pressure on public transportation is a series of bad choices that were made, sometimes based on wishful thinking at the state level,  and sometimes based on tendency to gamble in ways that regular folks on the ground would probably know better.
The subprime mortgages were only the visible part of what has been referred to as a huge shadow banking industry. This was built around the avoidance of regulation in the use of ever more complicated financial instruments to try to make a quick buck. Of course, “derivatives” is the term that’s been bandied about in the last decade or more. It basically meant making financial contracts based on other financial contracts and those financial contracts, the farther they got away from the original transaction, the more they looked simply like bets gambling on a worldwide scale. They were not really “new” but they were used to make a little extra money that was multiplied many times based on guessing whether the underlying deal was going to go bad, or was going to make money.

The tale was that they had these fancy financial computers that could predict the slightest increment of change and make money off of it. It turned out that those predictions were mostly based on a booming financial market that was a house of cards (Madoff’s scam was only a tiny example compared to what the largest banks were doing). J.P. Morgan Chase, Deutsche Bank and UBS are three of the major players behind our public transportation woes in Massachusetts.

Our transportation quasi-independent authorities got into debt, and then tried to bet against the banks to get out of that debt. Anybody in their right mind knows that you don’t bet against the biggest banks on a financial deal; but they got convinced that they could make a deal where they would guess better about interest rates, and figure out a way to pay less while the banks payed more. Instead, they ended up multiplying their existing debt many folds. Of course, those debts are secured by the good faith and credit of the people of Massachusetts, the tax-payers. Now our state government is saying they can’t do anything about those debts without hurting our credit rating. 

Los Angeles, Oakland, and a few other cities have taken a completely different response. They’ve gone back to the banks and said look, these financial deals are destroying our economy, and you need to negotiate with us. The state of Massachusetts, much like the city government of LA, is not financially insignificant. That is, the banks are going to want to negotiate with us; they’re not going to want us to take all of our financial dealings away from them especially when there are other big banks that might be more amendable to digging us out of this mess. All said and done, the banks are still getting us now beyond just foreclosures and the loss of jobs connected to that, but through debts on public transportation.

But we don’t have to be trapped in this unaffordable debt. Others are showing us the way. Now we just need leaders willing to stand up in yet another way against the biggest banks!

 

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