Headlines tell of Wall Street bailouts and banking abuses that have resulted in our usurious credit card hikes, heartless foreclosures, and the bankruptcy of Greece's entire economy. It seems that no person or institution is safe from corrupt banking practices.
While we might naively think that these practices are limited to Wall Street and large banking institutions, it has become clear that these practices have robbed our communities as well.
Big banks, along with politicians, have lured states and communities across the US to buy into banking derivatives or 'swaps,' and all are paying the price.
And in each of these cases, well heeled politicians were paving the way for the banks at the people's expense.
Let's look at a few example, and find out why Bill Richardson had to withdraw his name for Commerce Secretary, and why Colorado Senator Michael Bennet should have made a better investment of our tax dollars.
(hat tip to JeffcoBlue)
To explain the derivatives that bankrupted Greece, and threaten to rob the pension of Colorado School Teachers, let's look at this article from the New York Times:
Across our very own country, municipalities, school districts, sewer systems and other tax-exempt debt issuers are ensnared in the derivatives mess.
Like the credit default swaps that hid Greece's obligations, the instruments weighing on our municipalities were brought to us by the creative minds of Wall Street. The rocket scientists crafting the products got backup from swap advisers, a group of conflicted promoters who consulted municipalities and other issuers. Both of these camps peddled swaps as a way for tax-exempt debt issuers to reduce their financing costs.
So the bankers have preying upon municipalities who needed financial solutions in a down economy, only to find out they had been duped.
But who was advising the municipalities? Our elected officials:
(hat tip to Colleen Heild and Mike Gallagher)
They were touted as a state-of-the-art financing tool that would help New Mexico stretch its highway improvement dollars. Nearly five years later, state officials are trying to keep the $420 million in fancy financing from turning sour. In the last six months, one of the banks involved in the so-called interest rate swaps has gone bankrupt and the state has had to post about $16 million in collateral because the value of the investments dropped. That's in addition to major political fallout. The swaps and how a California company was selected to handle them are at the center of a federal grand jury investigation that derailed Gov. Bill Richardson's nomination as commerce secretary.
It seems that many state municipalities engaged in swaps that are now causing a lot of anger among tax payers:
Eight California municipalities, including Los Angeles, Fresno and San Diego County, filed civil class-action, or group lawsuits. The suits, most of which were consolidated with others in U.S. District Court in New York City, allege that banks colluded by deliberately losing bids in exchange for winning one in the future, providing so-called courtesy bids, secretly compensating losing bidders and allowing banks to see other bids.
Brokers participated in the collusion by facilitating communication among banks and sharing in illegal profits, the civil class-action suits allege.
And what is the cost of extracting your state from the swap?
New York State provides a good example. An Oct. 30, 2009, filing describing its swaps shows that for the most recent fiscal year, April 2008 to March 2009, the state paid $103 million to terminate roughly $2 billion worth of swaps -- more than a quarter of which resulted from the Lehman bankruptcy in September 2008.
On a local level here in Colorado, the circle grows tighter, as Colorado's own State Senator, Chris Romer, was at that time the person lobbying for New Mexico to engage in these swaps.
NMFA records show that among those lobbying for the swaps was a lead banker for JP Morgan, Chris Romer. His company ended up among the five banks that entered into swap agreements with the state.
And the ties to Colorado don't stop there - Senate appointee Michael Bennet was formerly at the head of Denver Public Schools. He was at the helm when the decision was made to invest the teachers' pension fund into a derivative 'swap' deal. Now, two years later, Denver Public Schools is paying about 3 million per month in losses on this swap.
DPS (Denver Public Schools) entered into negotiations with JP Morgan and CitiGroup, agreeing to issue fixed-rate bonds secured by DPS school buildings and other properties. DPS then began discussion to enter into an interest-rate swap agreement with JP Morgan, Bank of America and the Royal Bank of Canada. We believe that following ensued: DPS entered into a swap transaction, believing that interest rates would stay high. As recent financial news tells us, interest rates fell. We are concerned that this may have translated to a loss of taxpayer dollars.
I wonder if the local SEIU chapter will stand by its endorsement of the newly appointed Senator Michael Bennet, who has close ties these Wall street banks and was responsible for this 'swap' when SEIU international is now calling for a sweeping investigation of these 'swaps'.
In the face of the worst economy since the depression, we don't need gambling on derivatives with taxpayer money at the expense of teacher's pension.
Join SEIU's call for an investigation to get some kind of justice.
And in the face of Citizen's United, it's time we stop the corporate influence in elections.
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As for me, I will support Andrew Romanoff who has pledged to take no corporate money and run a people powered, not corporate powered, campaign.
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