How Wall Street Raped Detroit

What do you get when a desperate municipality run by corrupt and / or stupid politicians meets some of the smartest, most ruthless financiers in Wall Street history?

You get fuckin’ Detroit, a city that’s now been ruined and raped twice – once by the decline of American auto manufacturing and then bankers came in to despoil the corpse, barely cold, with swaps and high-cost schemes and financing tricks that did nothing but ring up the bills and prolong the inevitable.

Bloomberg News has the story:

The only winners in the financial crisis that brought Detroit to the brink of state takeover are Wall Street bankers who reaped more than $474 million from a city too poor to keep street lights working.

Banks including UBS AG (UBS), Bank of America Corp.’s Merrill Lynch and JPMorgan Chase & Co. (JPM) have enabled about $3.7 billion of bond issues to cover deficits, pension shortfalls and debt payments since 2005, according to data compiled by Bloomberg. Liabilities rose to almost $15 billion, including money owed retirees, according to a state treasurer’s review.

The debt sales cost Detroit $474 million, including underwriting expenses, bond-insurance premiums and fees for wrong-way bets on swaps, according to data compiled by Bloomberg. That almost equals the city’s 2013 budget for police and fire protection.

The largest part is $350 million owed for derivatives meant to lower borrowing costs on variable-rate debt.

Can’t believe all these brilliant derivatives trades didn’t solve the problems of the city! Usually works…

All the details below, if you can bring yourself to read it.

Source:

 

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