*I like to think that I know a little more than the average bear, but if I had been running the towns finance department, I would have sold it all to the devils for a promised better than 8% return too. Trouble is, the tax and fees alone are what is bankrupting almost every municipality across the country. The cause? Wall Street smarty pants selling us a bill of goods on safety of principal, the whole while stealing your lollipops. Hey, I thought only politicians stole lollipops?
Back-Door Taxes Hit U.S. With Financing in the Dark
Oct. 26 (Bloomberg) -- Salvatore Calvanese, the treasurer of Springfield, Massachusetts, for four years, had a ready defense for why he risked $14 million of taxpayer money on collateralized-debt obligations laden with subprime mortgages in 2007.
He didn’t know what he was buying, he says, and trusted the financial professionals who sold them and told him they were safe.
“I thought they were money markets that were just paying more,” Calvanese said in an interview. “Nobody ever used the term ‘CDO,’ and I am not sure I would have known what that was anyway.”
Such financial mistakes, often enabled by public officials’ lack of disclosure and accountability for almost 90 percent of government financings in the $2.8 trillion municipal bond market, are costing U.S. taxpayers as much as $6 billion a year, according to data compiled by Bloomberg in more than a dozen states.
The money lost to taxpayers -- when the worst recession since the Great Depression is forcing local governments to cut university funding, delay paying bills and raise taxes -- is enough to buy health care for everybody in Minneapolis; Orlando, Florida; and Grand Rapids, Michigan, according to figures from the U.S. Census Bureau and the U.S. Department of Health and Human Services.
Florida county commissioners approved no-bid deals with their favorite banks in an arrangement that led to criminal convictions. Pennsylvania school board members lost $4 million on an interest-rate swap agreement they didn’t understand in the unregulated $300 billion market for municipal derivatives.