Local Governments Held Hostage By Bank Deals

New York Times:

In the spring of 2008, the Denver public school system needed to plug a $400 million hole in its pension fund. Bankers at JPMorgan Chase offered what seemed to be a perfect solution.

...

Since it struck the deal, the school system has paid $115 million in interest and other fees, at least $25 million more than it originally anticipated.

To avoid mounting expenses, the Denver schools are looking to renegotiate the deal. But to unwind it all, the schools would have to pay the banks $81 million in termination fees, or about 19 percent of its $420 million payroll.

Read the whole story: New York Times

Comments

[sueinmn]

07:02 PM on 08/09/2010

How much did Bennit make personally and thats what you get listening to these predator bankers.

[stargazer13]

02:26 PM on 08/07/2010

Chase and JP Morgan have sold one gold share to over a thousand people

seems that is a crime awaiting medias attention !!

[artgurrl]

02:08 PM on 08/07/2010

I like the way the article states that no one saw this economic downturn coming. I disagree. The banks saw it as well as their Wall Street traders who were playing both sides of investing and shorting the derivatives market. Every municipality victimized and caught up in this massive robbery perpetuated by the crook banksters should come together and threaten them with no further business. Or, at least find a way to get their money back and sue the banks for mismanagement of funds and unscrupulous business practices. There must be something in the laws that we the people can use to fight back without resorting to the 2nd amendment.

[sueinmn]

07:03 PM on 08/09/2010

Charities have been sueing for the reasons you state and winning.

[LeeCalif]

07:50 PM on 08/06/2010

" Both Mr. Bennet, whom the White House has praised for his innovative approach to education, and Mr. Boasberg defend the deal they recommended in Denver back in 2008. "

These are the kinds of people Obama brings in to his administration, along with several
GoldmanSachs thieves. Make sure Obama is a one termer.
Support Progressive candidates with time and $.

[Dosadi]

07:39 PM on 08/06/2010

Big US banks confirmed as criminal enterprises.
http://www.worldreports.org/news/295_big_u.s._banks_confirmed_as_criminal_enterprises

[sueinmn]

07:05 PM on 08/09/2010

Yet where are the arrests? We should all be made whole as banks reaped such benefits of being too big to fail.

[ChasG]

02:41 PM on 08/06/2010

People managing the public pensions for teachers were incompetent; they allowed the fund to go over $400 million in the hole, and they knowingly decided to take higher risks with teachers' money in the hopes that higher returns would cover up their own incompetence. The banks cannot be blamed for what the pension managers did.
I'm not giving the financial industry any free pass or get out of jail free card-- but we all share responsibility for this mess we've gotten ourselves into economically, and blaming capitalism and free enterprise banks will solve nothing. On the other hand, realizing that de-regulation allowed this to happen is a rational criticism based in fact, and which can be corrected by re-regulating the industry as Congress has only started to do.
We need to discuss rational solutions, folks, and reject irrational attention-seeking rants with no basis in fact or reality.

[mattwg440]

03:02 PM on 08/06/2010

They can be blamed for the shortsightedness that helps them profit right now, while putting all those CHILDREN in a worse spot than they had to be. Yes, the people running it screwed up and are to blame too, that doesn't absolve the greed that blinds the bank. Over $100 million in interest?I think they used to call that loan sharking.

Keep thinking the bank is just fine doing this while more police forces get laid off, and more teachers get laid off, and more city and county budgets and workforces get slashed, and ask yourself where all that money went. Some suits in these banks and firms whose main accomplishment is convincing some person not to worry about that crazy high interest potential.

[ChasG]

05:15 PM on 08/06/2010

I'm not saying $100 million is excessive or not; I'm saying the pension managers accepted those terms knowingly, and the prevailing sentiment on this thread has been rather lop-sided in blaming a bank for decisions made by investors.
There may have been fraud involved, and as far as I know there are three indictments by SEC awaiting trial against individuals at JPM involved in this deal. If they are guilty as charged, I hope they serve long prison sentences. But three fraudsters at JPM is not an indictment of JPM for fraud. I'm not p[ushing back against these prosecutions of individuals committing fraud-- we need more of them. But I am pushing back against a lynch-mob mentality directed toward the banking industry generally.

[ChasG]

05:20 PM on 08/06/2010

And by the way, it is not fraudulent for an investment advisor to recommend an investment that does causes the investor to lose money. It is fraud to knowingly mislead investors and to withhold necessary disclosures. This will be decided in the SEC fraud prosecutions, so I will reserve judgment until the JPM employees have had their day in court. Meanwhile, they are "presumed innocent" under the law even if we personally have our doubts.

[GloriaY]

11:59 PM on 08/06/2010

They invested with Madoff.

[hellboundtrain]

02:07 PM on 08/06/2010

One question: How many jobs for any of The People (except those jobs of paper-pushers)
are created through derivatives?

[binksmom85]

04:02 PM on 08/06/2010

you already know the answer

[Dosadi]

07:41 PM on 08/06/2010

If I try to divide by that number will my calculator accept it?

[DBtv]

11:49 AM on 08/06/2010

More theft by criminal banksters and their ponzi schemes.

[karen1p]

11:35 AM on 08/06/2010

This article is a must read for all the naysayers who have uttered the words, "It's the homeowner's fault."

[Amalek]

12:31 PM on 08/06/2010

Not at all. This was a case of fairly sophisticated investors making a bet that interest rates would not go down further. They were wrong.

Homeowners were making bets that housing would continue to appreciate fast enough that they could refinance before the payments came due.

[karen1p]

12:37 PM on 08/06/2010

Yes, and "fairly sophisticated investors" still got duped by the banks....and....your point is?

[binksmom85]

04:05 PM on 08/06/2010

the banksters in testimony said many of these types of products were just made up as they went along, and no one knew how to price them. Analysts have also called some of the products they sold "boxes of hot air". They were conned by con-men. The first pillar of fraud is to create an atmosphere of trust, which is then betrayed....

[mrspiffy]

11:34 AM on 08/06/2010

Everyone has been duly hosed.
http://yieldpig.blogspot.com/

[binksmom85]

04:07 PM on 08/06/2010

All of the losses should be made up by the federal government in the form of national bank notes that are not issued with any Treasury debt attached. The gov't could make everyone whole *tomorrow* if there was any will to admit the failure of the monetary system we are living under.

get the dvd at secretofoz.com

[floodberg]

11:32 AM on 08/06/2010

THE TRUTH BEHIND THIS STORY WON'T SURPRISE ANYONE.

Michel Bennet was Superintendent of the Board, and helped push through this deal. Not surprisingly, he is now a US Senator, D-Co. Here's a link to the NYT news article. http://www.nytimes.com/2010/08/06/business/06denver.html?_r=1&dbk

If you want to figure out for whom Bennett really worked then and now, compare his big donor list http://www.opensecrets.org/politicians/contrib.php?cycle=2010&cid=N00030608&type=I with the list of biggest lobbying firms. http://www.opensecrets.org/lobby/top.php?indexType=l

[binkis1]

12:48 PM on 08/06/2010

The Pension SHORTFALL WAS created PRIOR TO BENNET...THe DPS Board chooses the investment Bankers and Investment advisors...DPS through out the locals and went for the jp morgan chase guys who promised returns without pain ans exposure. of neglect! DPS was warned about the possibility of short falls in the pension fundsin the mid 1990's

The timing on this is suspect considering a DPS board member was called out for supporting the sleazy, fact deprived, deficit of truth, bruised ego, below the belt, little [ All quotes from Denver post and local news channels factchecking] candidate Romanoff.. and the CEA union who hated Bennet for making them accountable .for students learning... BY the By the graduation rates and test scores are UP under the guideleines that Bennet put in place!

If romanoff and the co dem party get away with this they will get what they deserve..,A republican senator!

[DBtv]

02:28 PM on 08/06/2010

Don't be absurd. The sociopaths the republicks are running are unelectable.
.

[floodberg]

03:29 PM on 08/06/2010

I looked at his opensecrets.org donors (including the lobbyists, several of which I'm very familiar with), and he looks just like a Republican in the basics. I don't see where there's still any significant difference between the parties, except in ideology espoused. The end result is always what is the 'corporate' agenda that Obama believes in. His 'bipartisanship' unifying of Congress removed all barriers - they have excellent orchestrated media to convince us otherwise, but the way you catch it is to really look closely at things like the unemployment extension, which was initially foiled by the Dems.

[floodberg]

11:07 AM on 08/06/2010

The Denver School Board isn't full of idiots. They took the loan because it was the best immediate solution and now they want to 'renegotiate' or have it disallowed. As it clearly affects the public, I think this could be renegotiated, IF THE FEDERAL GOVERNMENT BACKED THE PLAY which of course it won't.

The much bigger issue is what were the individual members of the Denver School Board trying so desperately to hide. This question is like the Titanic iceberg - the critical mass is unseen, and very likely extremely damaging to the careers and reputations of the individuals on the school board

[Caru]

11:33 AM on 08/06/2010

Fanned.

[floodberg]

12:07 PM on 08/06/2010

Thanks Caru! Hope you saw my second post, just above this one. It has links!

[Intolerantcentrist]

11:05 AM on 08/06/2010

In a deal with the Devil, they sold their bones to save their skin.
We should get used to this; “Universal Banking” owns the universe.

[wikwox]

10:58 AM on 08/06/2010

Beware of Bankers Bearing Gifts, thier out to fleece you every time. Thanks Wall St.! Hope you enjoy your mansions and yachts.

[Lemmiwinks99]

12:01 PM on 08/06/2010

I promise that the bank contract was significantly less complicated than the finance reform bill. And the school board and bank both probably read it, unlike the bills passed in congress these days. To blame the banks for proposing a solution which the board then CHOSE to accept is ridiculous. The bank, unlike the gov't cannot force anyone to accept their terms.

[larmarch5]

02:00 PM on 08/06/2010

Banks, like alligators, do what banks, and alligators do. Beware.

[Grimway]

10:51 AM on 08/06/2010

I would rather see my tax money go into hunting down bankers than Osama!

[karen1p]

11:37 AM on 08/06/2010

You mean the guy that the U.S. funded while the Russians occupied Afghanistan? Yeah, me too.

[Lemmiwinks99]

12:02 PM on 08/06/2010

Maybe people should just be willing to accept budget cuts rather than accpet obviously flawed banking solutions?