Wall Street Banks screwed major American cities like Chicago
A few weeks ago, Ed Walker at Naked Capitalism wrote a piece about a white paper Saqib Bhatti of the Roosevelt Institute wrote last year detailing how Wall Street Banks screwed major American cities out of much needed cash. Bhatti claimed that cities are getting squeezed because Wall Street Banks put them into confusing and harmful municipal bond deals that included swaps and expensive buyouts. In his paper, Bhatti uses the City of Chicago as an example of how these types of “predatory” loans have hurt city services that the city provides and how further cuts may be needed due penalty clauses in the deal.
If this sounds familiar, its because it is essentially what happened to the City of Detroit who just emerged from the largest municipal bankruptcy in American history.
Bhatti calls on the City of Chicago to do what I and others called on former Detroit Mayor Dave Bing and then Detroit Emergency Financial Manager Kevyn Orr to do. We argued that the Detroit’s problems were not the fault of over bloated pensions like Michigan Governor Rick Snyder claimed but was due to Libor rigging and other shenanigans by Wall Street. We argued that it made more sense to fight these contracts in court. A Chapter 9 bankruptcy was expensive and didn’t solve Detroit’s long term economic problems. Besides, banks like RBS, UBS and others admitted they rigged the Libor interest rate and paid a fine to both the U.S. and UK governments.
You can read his paper below.