Brazen big banks, swap mania and the fallout
- New Jersey World Scientific Publishing 2019
- xxvii, 523 p.: ill. Includes bibliographical references and index
ch. 1 What Is This Book All About? Introduction Changes in Financing Strategies of Nonprofits A Critical Contract Design Feature Creating Values "on Paper" How does it Work? An Example: A Swap Contract from the NY MTA Portfolio Paying Enormous Termination (Fees) Penalties Are Nonprofit Officials Equipped to Deal with Swaps? An Illustrative Case: The Midway Airport Swap The Impetus for the Exponential Growth of Derivatives and Swaps The Orbit of ISDA: The Inside Shop Look Who is Guarding the Henhouse! The Means of Persuasion that Big Banks had Adopted a.Persuasion: Promising Mirage Benefits b.Persuasion: Providing Near-Term Quick Cash c.Persuasion: Buying Swaps as Seen by a Grand Jury d.Persuasion: Using Economic Dependence: The Glaring Example of the City of Atlanta Why was it difficult to Meet with the Actors? a.Concern for Pending Litigation Contents note continued: b.Novelty and Complexity of Interest Rate Swaps c.Lack of Knowledge d.Deception and Incomplete Disclosure of Facts and Risks e.Key Decision Makers are in Jail f.Staff Turnover ch. 2 Carol Loomis Described Four Derivatives' Sins: Lies, Leverage, Ignorance, and Arrogance a.Lies and Ignorance - Michael Lissack and Dade County, Florida (A Case of Big Banks' Deceitful Sales Tactics) b.Arrogance, Lies, and Leverage - Procter & Gamble versus Bankers Trust of New York (Another Case of Big Banks' Deceitful Sales Tactics) Cases In Wealth Transfer From Local Government Agencies To Big Banks ch. 3 The Saga of Jefferson County, Alabama, & JPMorgan Chase The Visible Shocks It All Started with the Sewer New Contracts and Deception Sharing the Loot The Aftermath ch. 4 Big Banks Took Nearly $900 million from Detroit for Terminating Swaps & Gave back Nothing Yet, That Was Not All! Contents note continued: The Real Human and Social Cost of Swaps The United Nations Coming to Detroit Lessons Learned Lessons Not Learned ch. 5 The City of Brotherly Love Drowned in the Eastern Swap Sinkhole The Illusion of Lowering the Cost of Borrowing Covering up the Mess Evidence of Cover Up In Summary ch. 6 The Heart of America and Windy City Handed Its Compass to the Banking Cartel The Big Picture Falling for the Weekly Auction Rate Obsession with Swaps ch. 7 Tales of Two Small Cities a.The City of Gainesville, Florida: Pays for Swaps and Raises Electricity Rates b.The City of Oakland: Got Stuck with Goldman Sachs and is Getting Nothing CASES IN WEALTH TRANSFER FROM STATE GOVERNMENT ENTITIES TO BIG BANKS: ALL THE FOUR SINS OF DERIVATIVES DESCRIBED BY LOOMIS WERE AT PLAY HERE ch. 8 The State of Illinois and Other Swap Gorillas Contents note continued: ch. 9 The State of New Jersey: The Pandora's Box of Interest Rate Swaps Cost Nearly $1.5 Billion Changing the Landscape Accelerating Losses More to the Story ch. 10 The Empire State Doctored Interest Rate Swap Gains Artfully Beating Own Drums The Shrinking Present Value Mark-to-Market Discussion More about the State of New York Swap Contracts The Irony CASES IN WEALTH TRANSFER FROM PUBLIC SCHOOLS TO BIG BANKS ch. 11 Jack Wagner's Mission to Rescue Pennsylvania from the $17.4 Billion Derivatives Mess ch. 12 The School District of Philadelphia Dismissed Staff to Save Money to Pay for Swaps ch. 13 Two Other Special Cases in Pennsylvania Schools a.Erie City School District b.State College Area School District ch. 14 Chicago Public Schools Dismissed Staff and Borrowed at High Interest Rates to Pay for Interest-Rate Swaps The Infeasibility of Attaining Synthetic Fixed Rates Contents note continued: ch. 15 Denver Public Schools: Paid High Price for the Advice of Unwitting Experts CASES IN WEALTH TRANSFER FROM COLLEGES AND UNIVERSITIES TO BIG BANKS: PAYING BIG BANKS HUGE SUMS OF MONEY FOR ILL-ADVISED INTEREST-RATE-EXCHANGE CONTRACTS ch. 16 The Flagship of the Tar Heel State Kept Dipping into the Same Losing Swap Well Getting Deeper into the Swap Mania ch. 17 The MSU Spartans Kept On Swapping Their Money for Nothing Obsession with Swap Contracts ch. 18 Interest-Rate Swaps Cost Harvard More Than $1.47 Billion ch. 19 The University of Texas System: A Large State-Run Hedge-Fund-Like in Austin Obsession with Swaps and Other Derivatives CASES IN WEALTH TRANSFER FROM HEALTH-CARE ORGANIZATIONS TO BIG BANKS ch. 20 Indiana University Health: A Case of Derivatives Abuse from the Midwest Obsessed with Swaps ch. 21 The University of California Health System: A Case of Derivatives Abuse from the West Contents note continued: ch. 22 Johns Hopkins Health System Corporation: A Case of Derivatives Abuse from the East ch. 23 The University of Florida Shands Hospital: A Case of Derivatives Abuse from the South Losses and Collateral: Idle Cash ch. 24 The Sisters of Charity of Leavenworth Health System ch. 25 Dignity Health Holds A Bigger Bag of IOUs to the Banking Cartel ch. 26 Texas Methodist Hospitals Did Not Escape Big Banks' Vise CASES IN WEALTH TRANSFER FROM TRANSIT AUTHORITIES TO BIG BANKS: INCREASING FARES TO PAY BIG BANKS FOR SWAP CONTRACTS ch. 27 With Swaps, Riding the Gravy Train Is Expensive ch. 28 The New York Metropolitan Transportation Authority Fell into the Eastern Swap Sinkhole Transparency Questioned ch. 29 The Bay Area Toll Authority (BATA) Fell into the Western Swap Sinkhole ch. 30 The Massachusetts Bay Transportation Authority Joined the Eastern Swap Sinkhole Interpretation Contents note continued: ch. 31 A Couple of Other Port Authorities a.The Port Authority of New York and New Jersey Paid Big Banks $242 Million to Exit Swaps b.Pennsylvania Turnpike Authority Confounds the Financing THE LIBOR SCANDAL: BIG BANKS' COLLUDED & CONSPIRED TO SIPHON MORE MONEY FROM THE PUBLIC SERVICE SECTOR & EVERYONE ELSE ch. 32 The London Connection: London Average Interest Rate (LIBOR) ch. 33 The Discovery of Cheating a.Litigating LIBOR Manipulation b.Cheating Chats and Why Manipulating LIBOR Matters c.Evidence from the Files of the Financial Services Authority UK and the FBI (USA) d.Collusion and Conspiracy at UBS AG: The Rain Man & Company e.The Rain Man's Long Reach to RBS (from the FBI Files) f.Deutsche Bank's High Cost of Denial UNCONSCIONABILITY: DANCING WITH THE "SNAKES" OF MODERN TIMES ch. 34 Are Interest Rate Swaps with Nonprofit Entities Unconscionable Contracts? Criterion 1 Presumed Equality of Values Contents note continued: Criterion 2 Ignoring Transaction Cost ch. 35 Epilogue.
For nearly two decades, countless non-profits in the U.S. were forced to pay big banks enormous sums of money to settle or terminate bilateral contracts known as Interest Rate Swaps (IRSs). Officials at non-profits had entered into these costly contracts unaware that each contract has only one winner, and that big banks did not intend to be the losers. The effects of such monetary transfers have been catastrophic. Money-strapped non-profits had to dismiss schoolteachers, shut off water supply to thousands of poor households, and downsize many other essential public services. Local and state governments, public school districts, universities, hospitals and transit authorities from New York to Los Angeles have been among the largest hit. This book presents selected cases and highlights the lack of evidence that decision makers at non-profits had fully understood the terms and complexities of IRSs. The evident unequal bargaining power thus gives rise to the high likelihood of unconscionable contracting. Additionally, for terminating these contracts, big banks collected huge sums of money for services that had not been, and will never be, rendered. Accordingly, questions arise as to whether these termination payments are tantamount to unjust enrichment.