AIG

Global financial markets are in peril. Panic is gripping Wall Street. The Dow has taken huge dives and continues to stagger. September job loss was the highest in five years and nearly one in six homeowners are under water – owing more on their mortgages than their houses are worth. Times are tough.

Several state and local governments are drowning in these rough waters. They can’t make payroll or raise money for vital public works projects. With revenues running dry and municipal bonds becoming a hard sell, city officials have thrown their hands up in exasperation. A few are even thinking about turning to the private sector and the very financial institutions that helped get us in this mess.

Milwaukee's comptroller has proposed privatizing its water system, hawking it off to the highest bidder, to raise funds to keep city operations running. This is a classic example of taxing through the tap. The city would lease off the utility for 75 to 99 years in exchange for a one-time payment of $500 million. Then whatever corporation gets the deal will invariably hike water prices not only to recover the city’s payout but also to pad their stockholders’ wallets. Leases are an absurdly expensive way to raise money – even in this tight municipal bond market.

Milwaukee is not alone. Akron, Ohio, will vote on a similar lease of their sewers this November. Morgan Stanley is advising the deal, which comes as no surprise. They are eyeing water investment, as have Goldman Sachs, the now-defunct Lehman Brothers and AIG.

For more than a decade, the global water barons have been going into cash-strapped communities to push them to privatize their water. They have paraded around as if they were the saviors of these struggling governments, claiming to have the capital to make needed improvements and upgrades. In the last few years, investment banks joined this charade, expecting big payouts.

Ah, but time did tell another story. The investment bank era is over. The government forced the last two big independent investment banks – Goldman Sachs and Morgan Stanley – to become commercial banks. The problem? Not enough capital.

The irony is too great. These were the very banks that had pranced into communities proclaiming their wealth and bad-mouthing government finance. Then – bam! Stocks plummet as bad decisions catch up with greedy speculators. Now the federal government has to use our tax dollars to bail out the crumbling institutions. Goldman Sachs and Morgan Stanley stand to be two of the biggest beneficiaries of the $700 billion bailout. AIG already got its cushion. 

We trusted Wall Street with our homes, and look what happened – subprime lending, speculation, foreclosure crisis, doors boarded up, tent cities across the nation. Can we afford to trust it with our water?

Instead of corporate handouts and golden parachutes, our tax dollars should support projects that benefit the public good and protect the wellbeing of communities across the country. The federal government should ensure the safe and sound operation of our nation's water systems, so that something as precious and necessary as water is never subject to the whims of speculators and the fleeting fancies of the fat cats on Wall Street. 
 

Act now and tell Congress to support a trust fund for clean and safe water. Tell them we need public money for public utilities.

For more information about how corporations could seek heady profits from the water funding crisis, check out our report Costly Returns.

[Image from Candor]