Wall Street leaves taxpayers on the hook for municipal swaps
I have been saying this all along, even before the Wall Street Crisis, long, long ago, going back to the Reagan years and I know I wasn’t wrong then and when the crisis happened it confirmed my theory: “FREE ENTERPRISE IS THE BEST ECONOMIC SYSTEM BUT IT HAS TO HAVE REGULATIONS” and I stand by that today.
What does it take to make the American public see that they have been taken for a ride? They have and some of them are stupid enough to continue their ideological dependency to the Teahadist-Republican Party like a crack addict that needs a fix. You show them the facts, you call them out on them and they continue to deny it, to go to Town Hall meetings and disrupt, to go and carry signs (often misspelled) and to vote for some dumb radical who is not qualified to be dog catcher.
This article by Michael McDonald illustrates my point:
Tue Nov 09, 2010 at 10:46:05 PM PST
Just another round of taxpayer billions tossed into the plutocratic sinkhole.
Bloomberg, in terrific (although terrifying) piece of in-depth explanatory reporting:
By Michael McDonald
“For more than a decade, banks and insurance companies convinced governments and nonprofits that financial engineering would lower interest rates on bonds sold for public projects such as roads, bridges and schools. That failed promise has cost more than $4 billion, according to data compiled by Bloomberg, as hundreds of borrowers from the Bay Area Toll Authority in Oakland, California, to Cornell University in Ithaca, New York, quietly paid Wall Street to end agreements since 2008…
Wall Street banks and insurers peddled financial derivatives known as interest-rate swaps to governments and nonprofits that bet they could lower the cost of borrowing. There were as much as $500 billion of the deals done in the $2.8 trillion municipal bond market before the credit crisis, according to a report by Randall Dodd, a senior researcher on the Financial Crisis Inquiry Commission, published by the International Monetary Fund in June.
Borrowers from New York to California are now paying to get out of agreements. Altogether, they have made more than $4 billion of termination payments to firms including New York- based Citigroup Inc., New York-based JPMorgan Chase & Co. and Charlotte, North Carolina-based Bank of America Corp. since the beginning of 2008, according to a review of hundreds of bond documents and credit-rating reports by Bloomberg News.
In contrast to the subprime crisis, few taxpayers know anything about the cost of untangling municipal swaps. The only disclosure of payments to Wall Street often is buried in documents borrowers have to give investors when they sell bonds.
In many cases, firms getting payments aren’t explicitly identified and government officials often don’t call attention to payments made to cancel contracts. Many of the telephone calls and e-mails from Bloomberg News to dozens of government and nonprofit officials over the last eight months seeking comment on derivative transactions went unanswered.
No transparency. Enormous complexity. Wall Street high-flyers peddling crap wares. Main Street left on the hook. Sound like ... oh, the last two years or so?
“Money that should be invested in students, classrooms and fixing infrastructure in Pennsylvania is instead lining the pockets of Wall Street,” Jack Wagner, the state’s auditor general, said in a statement in April after calling on lawmakers to ban swaps. “State and local governments must stop gambling with public money,” he said....
In Alabama, $5.8 billion of swaps Jefferson County used in a sewer-system financing in 2002 and 2003 produced $120.2 million in fees for banks, as much as $100 million more than it should have based on prevailing rates, according to James White, an adviser hired by the U.S. Securities and Exchange Commission.
What in God's name is it going to take to get these "deals" subject to accountability and oversight? How many more billions are taxpayers going to be bled?”
Isn’t this enough proof that Wall Street was and still is out of control? Isn’t this enough proof that Social Security should not be privatized? So, if you are still in doubt and like all deniers for accountability and transparency and still insist that there should be no regulations then there is no hope for you or for America.
