![\"http:\/\/www.latimes.com\/media\/photo\/2010-01\/51670332.jpg\"](\"http:\/\/www.latimes.com\/media\/photo\/2010-01\/51670332.jpg\" "\\"http:\/\/www.latimes.com\/media\/photo\/2010-01\/51670332.jpg\\"")
<\/img>Prodded by a nationwide union campaign, the Los Angeles City Council is
\ntrying to get out of an arrangement with two banks that was supposed to
\nreduce the city’s borrowing costs but instead has increased them by $19
\nmillion annually.<\/p>\n
City Councilman Richard Alarcon said city
\nofficials should refuse to do business with any bank that won’t rework
\nthe terms of the so-called "interest rate swaps," transactions that
\nwere embraced by Los Angeles and other cities over the last decade.<\/p>\n
Alarcon
\nsaid he did not believe that the banks involved in the transaction,
\nDexia Credit Local and Bank of New York Mellon, intentionally sought to
\nharm the city when the swaps were created. Still, he compared the two
\nbanks to merchants in the San Fernando Valley who sold water for $20
\nper gallon in the days after the 1994 Northridge earthquake.
<\/br>
<\/br>"To me, this is tantamount to gouging," said Alarcon, who represents the northeast Valley.<\/p>\n
<\/br>The
\nCity Council followed Alarcon’s lead last week, voting unanimously to
\ninstruct its financial analysts to ask the two banks to rewrite or
\ncancel the terms of its two interest swaps. Those deals, approved in
\n2006, cover $316.8 million in debt incurred by a wastewater program
\nthat pays for the repair and replacement of sewer lines and sewage
\ntreatment plants, according to city officials.<\/p>\n