"No Banker Left Behind"
From The New York Times:
Editorial Board
Aug. 15, 2013
"The Detroit bankruptcy case has been cast as a contest between bondholders and pensioners that can be resolved only by shared sacrifice [i.e. the City is getting ready to betray its retired employees.]"
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| Detr-oink, Michigan! |
"In principle, we have no problem with that .... What we do have a problem with is shared sacrifice that does not seem to apply to the big banks that abetted Detroit's descent into bankruptcy."
"Last month, just days before its bankruptcy filing, Detroit reached its first settlement with creditors. The settlement was with UBS and BOA. Detroit is set to pay [the banks] an estimated $250 million to terminate a soured derivatives transaction from 2005."
"The derivatives, known as interest-rate swaps, were supposed to protect Detroit from rising interest payments."
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| "MO(ink)-TOWN!" |
"The banks would pay Detroit if interest rates rose, and Detroit would pay the banks if rates fell. By 2009, both interest rates and the City's credit rating were falling, forcing Detroit to pay some $50 million year..."
"... the banks have agreed to discount of as much as 25% of what they are owed. But the haircut doesn't mean the banks will suffer. They have already made money on the swaps..."
"Detroit's problems are a reminder of broader challenges, identified but still unmet: protecting pensions; protecting municipalities from Wall Street; and, at long last, revoking the obscene privileges of banks that allow them to prosper on the failings of others."
"... prosper on the failings of others."
(Derivatives: Another "Unite for Goof" by America's Credit Unions.)
1 comment:
It was the politicians who did not fund their commitments in a responsible fashion. It was the politicians who attempted to cover up their irresponsible actions by making one sided derivatives. Derivatives are two sided bets. The bankers are the casinos. They found someone else to by the other side. Please place the blame or the corrupt politicians who mismanaged their public trust.
Sure happy that NCUA is on top of this derivatives issue and are going to carefully monitor the large credit unions who are going to make these bets risking smaller credit union members money!
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