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.



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