NCUA's Derivative Proposal: Adding Risk To The NCUSIF Out of Ignorance Or Negligence ?

From June 5th Bloomberg Newswire:

"The biggest U.S. bank, JPMorgan Chase, agreed to forgive $842 million of debt owed to it by Jefferson County (Birmingham), Alabama where it took the lead in arranging risky securities deals that pushed the county into the largest municipal bankruptcy in November 2011."

"A-h-h, a free lunch...."

"... JPMorgan initially reaped substantial fees arranging interest rate swaps that subsequently proved tainted by municipal corruption and devastating to taxpayers.... Everybody thought there was a free lunch and they could all take advantage of it at the same time. It burned them all."

"JPMorgan and other banks also sold the

" Born Fee ! "

county related derivatives to protect against the risk posed by the securities, earning undisclosed fees of about $120 million..."

"When credit dried up on Wall Street during the crisis in 2008, investors dumped Jefferson County's bonds and their yield soared, pushing the county's costs sharply higher. Derivatives that were supposed to protect against such an event added to the costs as central banks slashed interest rates."

"The county was the municipality hardest hit

"P-s-s-t, ova here,
Gotta a deal for ya'..."

by the unraveling of derivative deals arranged by Wall Street banks for governmental borrowers. Nationally, agencies from the operator of the San Francisco Bay Bridge to Pennsylvania school districts paid at least $4 billion in fees to back out of the contracts."

"Gotta run, but it's been fun..!"

JPMorgan in 2008 decided to get out of the business of selling derivatives to municipalities.  In 2009 without admitting or denying wrongdoing, the bank agreed to pay $75 million and to forgive $647 million in derivative fees owed by Jefferson County to settle with the SEC over the undisclosed payments made to local bankers."

"Everyone came in and wanted to suck the place dry," said Taylor , the former regulator and executive director of the Municipal Securities Rulemaking Board."  

"Have you heard the one about
credit unions getting into derivatives...?"

"Everyone looks bad in this. And everybody should look bad."