– Denver Public Schools Pay $216 Million to Wall Street Banks to Unwind Swaps (Liberty Blitzkrieg, May 12, 2013):
You can move from New York City to Colorado, but it seems you can never escape the all encompassing tentacles of Wall Street parasitism and theft. I recently covered a similar situation back in March in my piece Wall Street: $474 Million, Detroit: 0. In both cases it seems clear that public officials had no idea what they were getting into and there was a great deal of irresponsibility, but that is beside the point. It’d be one thing to say these communities should suffer the consequences of their actions if Wall Street had to as well, but we all know that isn’t the case. So it is highly immoral and culturally destructive to say it’s ok that Wall Street gets bailed out from all their mistakes and then is able to turn around and impose austerity on everyone else. That’s the way America works today and we can thank Ben Bernanke and Barack Obama for that reality. We must never forget the enablers in chief of all of this. Oh, and did I mention that the $216 million paid by Denver represents two-thirds of annual teaching expenses? USA! USA!
From Bloomberg:
Wall Street banks collected $215.6 million that Denver’s public schools paid to unwind swaps and sell bonds since the district began borrowing to cut pension costs in 2008. That sum is about two-thirds of annual teaching expenses.
The district paid $146.6 million last month to banks, including RBC Capital Markets LLC, Wells Fargo Securities LLC and Bank of America Corp., to end interest-rate swaps as part of a second attempt to restructure a 2008 borrowing, bond documents show. The April 17 deal sold as the district’s property-tax rate has risen 26 percent in two years to fund education.
Municipal borrowers from Detroit’s utilities to Harvard University in Cambridge, Massachusetts, have paid billions of dollars to banks to end privately negotiated interest-rate bets sold as hedges. The Federal Reserve’s policy of holding its benchmark borrowing rate near zero since 2008 has turned many of the swaps into wrong-way bets.
The Federal Reserve works for Wall Street. Period, end of story.
Denver’s schools might have avoided borrowing if elected officials had adequately funded pensions, according to a draft study for Princeton University’s Woodrow Wilson School of Public and International Affairs by Joseph Fichera, chief executive officer of Saber Partners LLC in New York. To fill the gap, officials chose complex financings sold by Wall Street instead of raising taxes or renegotiating benefits, he said.
Denver schools wound up doing a bond deal in 2011, along with last month’s, to convert the 2008 bonds to fixed-rate and exit swaps. The $215.6 million paid to unwind swaps as well as fees for new bond sales has eroded money the district set out to save for its pension plan. Besides the swap termination payments, the cost includes fees to underwriters and other professionals.
“We’ve lost hundreds of millions of dollars on deals we never should have been in,” said Jeannie Kaplan, a district board member who said she voted for the 2008 borrowing and then began pushing to end it in 2010. “Public institutions with elected boards shouldn’t be in these kinds of transactions. Our responsibility is to use the public’s money in a judicious way.”
The payment “will affect the classroom,” Kaplan said.
MacPherson said the borrowings will add $1 billion to pension costs over the life of the loans compared with a scenario where the district had just merged its pension plan into the state system.
“This deal hasn’t done much for anyone — except the bankers, who are dancing in the streets,” said MacPherson.
Yep, they’re still dancing…and it will be you who pays for it when they collapse again.
Full article here.
In Liberty,
Mike
No wonder Detroit is broke. They are bringing in the banksters to do a “bust out” of the school system. Since when have schools become Wall Street players? Somebody thought they found an easy way to pay their salaries and fund school projects. When it backfired, the banksters moved in, just like a mafia bust out. It is insane. Our schools have lost all their quality, they want to arm the teachers in the classrooms……..we are a nation that has lost all its sanity.
It is time for people to go back to a simpler mode of teaching in their community, and stay away from things they don’t understand. I see entire counties and cities pouring cash into Apple to raise their cash flow. Even though the value isn’t there, they are desperate to raise money. Now that Apple is showing cracks in it’s formerly invulnerable company, more communities will suffer greatly.
Wall Street has no regulations, no safeguards for smaller investors. All was signed away by Bill Clinton, the first republican with a d after his name in 1999. How can a community compete with High Frequency Trade and other daily crooked schemes?
This country has been gutted of it’s wealth. All the rules and regulations that made this such a good place to invest are gone. All safeguard laws and chances for recourse have vanished.
Jon Corzine of MF Global is an excellent example. He stole a billion dollars from investors whose only mistake was to park money in his company. Many of the accounts he went into were not margined, just simple people like you or me, trying to save for their futures. The average amount of money in their accounts averaged in the $50K+ range. The money is gone, and Jon Corzine walks free with an extra billion dollars in his pocket. DOJ claims they have no grounds to investigate or charge him.
We have become a 3rd world country.
We are finished as a 1st world nation, nobody with any sense invests here any longer, they go overseas, along with all the decent paying jobs and growth.
This country has been gutted of it’s wealth. Money is a funny thing, you can only spend it once. We have skated on our once-strong reputation since it began in 2001, but the cracks are showing everywhere and the rest of the world sees them clearly. Even the talking heads on the financial channels sell the opportunities of “emerging economies” in Africa and Asia.