In August 2014, the Los Ange­les City Coun­cil debat­ed whether to call for the rene­go­ti­a­tion of the city’s finan­cial deals. A report by the labor-com­mu­ni­ty coali­tion Fix L.A. found that the city had spent more than twice as much on bank­ing fees in fis­cal year 2013 as it had on street services.

Just three U.S. cities—New York, Los Angeles and Chicago—together with their related agencies and pension funds, do nearly $600 billion of business with Wall Street every year.

To try to bal­ance its bud­get, Los Ange­les had enact­ed hun­dreds of mil­lions of dol­lars in cuts over the pre­vi­ous five years. City jobs had been slashed by 10 per­cent, flood con­trol pro­ce­dures had been cut back, crum­bling side­walks were not repaired and alleys were rarely cleared of debris. Sew­er inspec­tions ceased entire­ly; the num­ber of sew­er over­flows dou­bled from 2008 to 2013.

The cam­paign slo­gan wrote itself: ​“Invest in our streets, not Wall Street!”

At the city coun­cil debate, Tim­o­thy Butch­er, a work­er with the Bureau of Street Ser­vices, got up and said, ​“I don’t know a whole lot about high finance. I’m just a truck dri­ver. But I do know, if I go to a bank and they give me a bad deal, I don’t deal with that bank any more. And I don’t under­stand why the city can’t use the same kind of con­cept on some of these big banks, say­ing, ​‘Hey, help us out or, you know, we’re not going to deal with you any more.’ ”

The City Coun­cil approved the res­o­lu­tion unanimously.

It was a blow against both the aus­ter­i­ty agen­da and the iron grip of Wall Street on Amer­i­can cities. State and local gov­ern­ments in the Unit­ed States rely on Wall Street firms to put togeth­er bond deals, man­age their invest­ments and pro­vide finan­cial ser­vices. For this, banks charge bil­lions of dol­lars in fees each year. Pub­lic offi­cials believe they have lit­tle choice but to cough up. When there are rev­enue short­falls, cities typ­i­cal­ly impose aus­ter­i­ty mea­sures and cut essen­tial com­mu­ni­ty ser­vices, but Wall Street gets a free pass — pay­ments to banks are con­sid­ered untouchable.

Pub­lic offi­cials assume (wrong­ly) that finan­cial fees are set in stone because they are based on so-called mar­ket rates. How­ev­er, mar­ket rates aren’t pre­or­dained by God. Banks set them, and pub­lic finance offi­cials sim­ply don’t demand any­thing sub­stan­tive­ly lower.

So, what if cities took a page from the labor move­ment and bar­gained col­lec­tive­ly over inter­est rates and oth­er finan­cial deals?

The sim­ple rea­son why anti-union politi­cians are wag­ing a war on col­lec­tive bar­gain­ing by work­ers is that it works: There is pow­er in num­bers. The basic idea behind such bar­gain­ing is to shift the bal­ance of pow­er in the employ­er-employ­ee rela­tion­ship and empow­er work­ers to nego­ti­ate with own­ers on a more equal footing.

But col­lec­tive bar­gain­ing does not have to be lim­it­ed to the work­place. Stu­dent orga­ni­za­tions such as Unit­ed Stu­dents Against Sweat­shops have forced uni­ver­si­ty admin­is­tra­tions to nego­ti­ate over labor stan­dards for their mer­chan­dise ven­dors. Con­sumer unions press retail­ers over issues like pric­ing and safe­ty stan­dards. Com­mu­ni­ty orga­ni­za­tions are able to nego­ti­ate com­mu­ni­ty-ben­e­fit agree­ments with major cor­po­ra­tions in their cities and win ben­e­fits such as local hir­ing poli­cies and com­mu­ni­ty invest­ment standards.

Sim­i­lar­ly, pub­lic finance offi­cials in cities, states and school dis­tricts across the coun­try could apply col­lec­tive bar­gain­ing prac­tices to their finan­cial rela­tion­ships with Wall Street. While there is no estab­lished mech­a­nism for them to do so, there are some cre­ative options worth explor­ing. For exam­ple, cities could estab­lish a non­prof­it or pub­licly fund­ed agency to set guide­lines for munic­i­pal finance deals and refuse to do busi­ness with any bank that does not com­ply. (More on this later.)

This may sound pie-in-the-sky, but the real­i­ty is that Amer­i­can tax­pay­er dol­lars are a tremen­dous source of bar­gain­ing pow­er. Just three U.S. cities— New York, Los Ange­les and Chica­go— togeth­er with their relat­ed agen­cies and pen­sion funds, do near­ly $600 bil­lion of busi­ness with Wall Street every year, more than the gross domes­tic prod­uct of Swe­den. Wall Street wants a piece of that action. If it has to jump through a few hoops to get it, it will. This gives pub­lic offi­cials the lever­age to demand low­er inter­est rates and fair­er terms, free­ing up scarce funds for com­mu­ni­ty ser­vices like parks, libraries and schools.

Run­away fees

Over the last few decades, the bank­ing indus­try has shift­ed its prof­it mod­el away from inter­est. Big banks’ prof­its now rely heav­i­ly on fees — the mon­ey charged for cre­at­ing loans, pack­ag­ing them into secu­ri­ties, sell­ing them and ser­vic­ing them. This struc­ture incen­tivizes banks to push more com­plex and expen­sive deals, like adjustable-rate mort­gages and vari­able-rate bonds, that require fees and add-ons.

Bank­ing fees do not have to bear any rela­tion­ship to the actu­al cost of pro­vid­ing ser­vices. Banks charge what­ev­er they can get away with, which is why fees have shot up as banks have con­sol­i­dat­ed and cus­tomers’ choic­es have nar­rowed. For exam­ple, in 2007, Bank of Amer­i­ca raised its ATM fee for non-cus­tomers from $2 to $3. In all like­li­hood, the bank’s costs hadn’t sud­den­ly risen 50 per­cent, despite a spokesperson’s claim that the fee hike would off­set ​“sig­nif­i­cant” expan­sion and upgrade of its machines. Banks also arbi­trar­i­ly raised prices on cred­it enhance­ments for munic­i­pal bor­row­ers after the finan­cial crash.

For cities and states, which deal in large dol­lar amounts, this nick­el-and­dim­ing hits par­tic­u­lar­ly hard. A 1 per­cent fee on a $200 mil­lion bond is a lot more mon­ey than a 1 per­cent fee on a $200,000 mort­gage. That explains why the city of Los Ange­les paid $334 mil­lion in pub­licly dis­closed fees for finan­cial ser­vices in fis­cal year 2013, accord­ing to the Fix L.A. report. This amount did not include prin­ci­pal or inter­est on any debt, and nei­ther did it include fees that are not pub­licly dis­closed, like the astro­nom­i­cal fees hedge funds and pri­vate equi­ty firms charge pen­sion funds to man­age investments.

In Illi­nois, a pre­lim­i­nary analy­sis by researchers at the Ser­vice Employ­ees Inter­na­tion­al Union (SEIU) — full dis­clo­sure: where I used to work — found that the state’s pen­sion funds spent approx­i­mate­ly $400 mil­lion in pub­licly dis­closed fees in 2014 alone. New York City Comp­trol­ler Scott Stringer has released a report show­ing that near­ly all of the returns from the city’s five pen­sion funds over the past 10 years — approx­i­mate­ly $2.5 bil­lion — have been eat­en up by fees. An inves­ti­ga­tion by the Inter­na­tion­al Busi­ness Times found that New Jersey’s pen­sion funds paid more than $600 mil­lion in finan­cial fees in 2014.

Every dol­lar that banks col­lect in fees from state and local gov­ern­ments and pen­sion funds is a dol­lar not going toward essen­tial neigh­bor­hood ser­vices. It’s not just the streets and sew­ers of Los Ange­les. Illi­nois is tee­ter­ing on the edge of a gov­ern­ment shut­down. Already, Gov. Bruce Rauner has slashed fund­ing for col­lege schol­ar­ships for low-income stu­dents, tak­en a hatch­et to vital health­care pro­grams like Med­ic­aid, and cut state fund­ing for Cease­Fire, a high­ly regard­ed vio­lence-pre­ven­tion pro­gram with a proven track record.

Most pub­lic offi­cials still resist acknowl­edg­ing that these fees are a prob­lem. When Gov. Rauner tried to cut the munic­i­pal share of state income tax rev­enue by 50 per­cent this spring, the Illi­nois House of Rep­re­sen­ta­tives respond­ed with a first-of-its-kind res­o­lu­tion urg­ing the state to match any such cuts with pro­por­tion­al cuts to finan­cial-ser­vice fees. SEIU also pro­posed a reduc­tion of finan­cial-ser­vice fees dur­ing its con­tract nego­ti­a­tions for state work­ers, but this was round­ly reject­ed by the Rauner administration.

Of course, Rauner has per­son­al­ly prof­it­ed from these fees in the past. Before decid­ing to run for office, he was the man­ag­ing direc­tor of a pri­vate equi­ty firm that did busi­ness with Illi­nois pen­sion funds, GTCR LLC.

But even pub­lic finance offi­cials who don’t have direct indus­try ties typ­i­cal­ly drag their feet on fee reduc­tions. The Los Ange­les City Council’s efforts to pres­sure banks into rene­go­ti­at­ing or ter­mi­nat­ing cost­ly finan­cial deals were met with stiff resis­tance from the city’s finan­cial officers.

There are a num­ber of rea­sons why finance staff can be reluc­tant, if not obstruc­tion­ist, in efforts to cur­tail bank­ing fees. One is the revolv­ing door between pub­lic finance jobs and Wall Street. Anoth­er is the fact that pub­lic offi­cials can be out­flanked by smoothtalk­ing bankers mak­ing dis­hon­est and decep­tive sales pitch­es. But per­haps the biggest rea­son is that offi­cials tru­ly believe they got the best deal they could. Los Angeles’s finance staff point out that even though they paid $334 mil­lion in fees in 2013 alone, they actu­al­ly did bet­ter than many of their peers.

When Coun­cilmem­ber Paul Koretz called for a vote on the motion in Los Ange­les, he skew­ered the City Admin­is­tra­tive Officer’s (CAO) office, say­ing: ​“Our lack of suc­cess in nego­ti­at­ing thus far could part­ly be a fac­tor of CAO say­ing that, ​‘Hey, this is a fine deal and we’ve done as well on this as any­thing else we could do.’ ”

Chang­ing the rules

Under the cur­rent sys­tem, Wall Street sets the rules of the game and pub­lic offi­cials think they have no choice but to play on those terms. They may nego­ti­ate around the mar­gins and get a fee low­ered by half a per­cent­age point, but they do not typ­i­cal­ly push back on the illog­ic of the under­ly­ing fee structures.

Cities that con­sid­er tak­ing a stand against Wall Street are rou­tine­ly told that if they do, their cred­it rat­ings will be down­grad­ed, and banks and investors will stop doing busi­ness with them. In real­i­ty, the pub­lic finance offi­cials who claim they have no choice but to pay high fees and accept oner­ous terms from Wall Street banks are like ele­phants afraid of mice. The notion that Wall Street could sus­tain a pro­longed boy­cott against a city or state as pun­ish­ment goes against the very nature of bank­ing. U.S. tax­pay­er dol­lars are among the largest pools of cap­i­tal in the world. If there is mon­ey to be made, there will always be a bank that will step in to get that business.

Sim­i­lar­ly, threats about cred­it rat­ing down­grades are base­less. Rat­ing agen­cies are con­cerned with a borrower’s abil­i­ty to pay back its bond­hold­ers. If any­thing, nego­ti­at­ing low­er fees with banks would free up mon­ey and make cities and states less like­ly to default.

Some cities and states are already blaz­ing the trail. In 2010, then-Mass­a­chu­setts State Trea­sur­er Tim­o­thy Cahill moved state deposits out of Bank of Amer­i­ca, Cit­i­group and Wells Far­go because the banks’ cred­it card oper­a­tions did not com­ply with the state’s usury law, which caps inter­est rates at 18 percent.

In 2012, the city of Oak­land ini­ti­at­ed a boy­cott of Gold­man Sachs because the bank refused to rene­go­ti­ate a deal that had put the city on the los­ing side of a risky inter­est-rate bet cost­ing $4 mil­ion in annu­al fees and payments.

And ear­li­er this year, the Board of Super­vi­sors of San­ta Cruz Coun­ty, Calif., vot­ed not to do any new busi­ness for the next five years with banks con­vict­ed of felonies. The boy­cott affects the five banks, includ­ing JPMor­gan Chase and Cit­i­group, that plead­ed guilty to ille­gal­ly rig­ging for­eign exchange rates.

These actions are first steps. How­ev­er, they would be sig­nif­i­cant­ly more effec­tive if cities and states joined togeth­er. When Oak­land — a mid-sized city of 400,000 peo­ple — boy­cotted Gold­man Sachs, Gold­man didn’t flinch. But if sev­er­al cities, states and school dis­tricts band­ed togeth­er and threat­ened a boy­cott, the bank­ing behe­moth would be forced to take notice.

Pow­er in numbers

In an ide­al world, the fed­er­al gov­ern­ment would estab­lish stan­dards for pro­tect­ing state and local offi­cials against preda­to­ry finan­cial deals. In the same way that there is a Con­sumer Finan­cial Pro­tec­tion Bureau, there is a dire need for a Munic­i­pal Finan­cial Pro­tec­tion Bureau whose top pri­or­i­ty would be to pro­tect tax­pay­ers’ inter­ests. Even though there are already agen­cies with over­sight over munic­i­pal finance — such as the Munic­i­pal Secu­ri­ties Rule­mak­ing Board and the Secu­ri­ties and Exchange Com­mis­sion — pro­tect­ing cities and states from abuse is not their pri­or­i­ty. And they have close ties to the finan­cial ser­vices industry.

Because fed­er­al reg­u­la­tion has proven woe­ful­ly inad­e­quate, and the chances of effec­tive con­gres­sion­al action in the near future are slim to none, cities and states need to step up.

If just New York, Los Ange­les and Chica­go band­ed togeth­er and threat­ened to with­hold their col­lec­tive $600 bil­lion of poten­tial annu­al busi­ness with Wall Street, they wouldn’t have to sim­ply accept the so-called mar­ket rates. They have enough bar­gain­ing pow­er to set their own.

Togeth­er, they could refuse to sign con­tracts that pre­vent them from pub­licly dis­clos­ing fees. If they also get their state gov­ern­ments and pen­sion funds on board, they could alter fee struc­tures for things like bond under­writ­ing. They could require any bank that pitch­es prod­ucts to sign a fidu­cia­ry agree­ment, mean­ing they are legal­ly required to put tax­pay­er inter­ests ahead of their own.

San­ta Cruz Coun­ty Super­vi­sor Ryan Coon­er­ty has already said he is reach­ing out to oth­er juris­dic­tions across the coun­try to urge them to join in refus­ing to do busi­ness with felo­nious banks. If pub­lic offi­cials were to coor­di­nate their demands and present a uni­fied front, they could force the banks to take them seriously.

My orga­ni­za­tion, the Roo­sevelt Institute’s ReFund Amer­i­ca Project, works with com­mu­ni­ty-labor coali­tions in cities nation­wide that are call­ing for a reduc­tion in bank fees and an end to preda­to­ry munic­i­pal finance deals. Last sum­mer, ReFund Amer­i­ca and Local Progress — a net­work link­ing local elect­ed offi­cials with unions and pro­gres­sive groups — led a small meet­ing called ​“A Pro­gres­sive Vision for Munic­i­pal Finance.” We brought togeth­er orga­niz­ers, pol­i­cy experts and pub­lic offi­cials to dis­cuss var­i­ous pro­pos­als for fix­ing munic­i­pal finance. Among those present were four city coun­cilmem­bers and three rep­re­sen­ta­tives from may­ors’ offices. These offi­cials expressed strong inter­est in devel­op­ing a bar­gain­ing vehi­cle that would allow cities to take col­lec­tive action to stand up to Wall Street.

One idea was the cre­ation of a non­prof­it or pub­lic agency to set munic­i­pal finance guide­lines. Indi­vid­ual cities and states could sub­scribe to these guide­lines and the agency would in effect become the gate­keep­er for banks wish­ing to do busi­ness with them. The more sub­scribers the agency had, the more bar­gain­ing pow­er it would hold. Strict con­trols would help ensure the agency remained scrupu­lous­ly inde­pen­dent of Wall Street. That orga­ni­za­tion could even be the pre­cur­sor to a nation­al Munic­i­pal Finan­cial Pro­tec­tion Bureau.

Peo­ple over profit

Togeth­er, Amer­i­can cities, states and pen­sion funds hold untold pow­er. If they flex their mus­cles and orga­nize around coor­di­nat­ed demands, they can rad­i­cal­ly trans­form tax­pay­ers’ rela­tion­ship with Wall Street.

In 2012, a com­mu­ni­ty leader from Oak­land attend­ed the Gold­man Sachs share­hold­er meet­ing in New York City and urged CEO Lloyd Blank­fein to rene­go­ti­ate its inter­est rate swap with the city to avoid library clo­sures and lay­offs. He said it was ​“an issue of moral­i­ty.” Blank­fein respond­ed, ​“No, I think it’s a mat­ter of share­hold­er assets.”

This is the men­tal­i­ty that led Rolling Stone’s Matt Taib­bi to call Gold­man Sachs ​“a great vam­pire squid wrapped around the face of human­i­ty, relent­less­ly jam­ming its blood fun­nel into any­thing that smells like money.”

It’s not just Gold­man. All of munic­i­pal finance has become an extrac­tive indus­try, pump­ing bil­lions away from the com­mu­ni­ties that need them most. Moral­i­ty is an exter­nal­i­ty that finan­cial firms sel­dom con­cern them­selves with. The finan­cial sector’s fee-based busi­ness mod­el is designed to max­i­mize prof­its, not to pro­tect taxpayers.

Banks may not have a moral com­pass, but their busi­ness con­tracts with our state and local gov­ern­ments can and should. After all, our cities, states and school dis­tricts are not sim­ply fod­der for Wall Street’s insa­tiable greed. Our elect­ed lead­ers have a duty to pro­tect us from preda­to­ry finan­cial prac­tices. Cities and states can force banks to charge dras­ti­cal­ly low­er fees, do away with arbi­trary fee struc­tures and elim­i­nate oner­ous terms that divert bil­lions of dol­lars away from the most vul­ner­a­ble mem­bers of our soci­ety into bonus checks for our nation’s wealth­i­est few.

Gov­er­nors in states like Wis­con­sin, Michi­gan and Illi­nois are wag­ing war on col­lec­tive bar­gain­ing and telling tax­pay­ers that empow­er­ing public­sec­tor unions robs state cof­fers, but the real drain on pub­lic trea­suries is the bil­lions in fees paid to banks every year. And unlike mon­ey that goes into work­ers’ pock­ets, most of these fees are not recy­cled back into the local econ­o­my but sent to off­shore tax havens or invest­ed in com­plex finan­cial schemes. The irony is that col­lec­tive bar­gain­ing is one of the most effec­tive tools avail­able to pub­lic offi­cials who tru­ly want to do right by tax­pay­ers — and cast off Wall Street’s tentacles.