More Financial Mess from Daley
- Already facing a host of financial worries, Mayor Rahm Emanuel’s administration could be stuck with a nearly $200 million tab as a result of betting heavily on risky interest-rate “swaps” under former Mayor Richard M. Daley.
The deals required the city to maintain a certain credit rating, but the rating has fallen since the Daley
administration made them, putting the city at risk.
The financial institutions involved could terminate the deals and demand immediate payment if the ratings agency Moody’s Investor Service drops the city’s credit rating again — which it has warned it will do unless Chicago’s underfunded pensions are dramatically reformed.
The entire article can be read here, but it appears that Chicago is relying on the goodwill of numerous financial institutions to not call in certain markers - institutions that stand to make billions extra if ratings stay or fall lower. Betting on financial failure in a way.
Explanations?
Explanations?
Labels: money questions
posted by SCC at 1:03 AM
54 Comments:
Sell Magget Daley park..
Worse than Detroit.
Even after the countless stories of financial ruin Daley left Chicago in, Rahm still worships this scumbag and spends millions to honor Daley and his scumbag family with parks and other BS. Sick!
Wasn't Bush president at that time and Chaney his chief advisor? Why blame a honest democrat mayor?
Looks like the chickens are coming home.
Good ol Richie Daley.....the gift that keeps on giving.
Like or hate rham he was stuck with a ton of bullshit from the daily years sob should go to jail.
I spent an hour looking this up ("credit default swap") and I didn't understand it. The Suntimes video doesn't help explain much (my thinking is if the Suntimes can't do basic journalism, they can't explain complicated financial transactions.) From an investor's standpoint, it is actually a tempting thing: betting on Chicago's failure to pay bills.
My guess is that Daley (with a rubber stamp from the city council, naturally), tried to take advantage of the "awesome" economy a few years back and see if the "city" could make money. By "city" I mean Chicago, but that money would have just been funneled elsewhere. Daley in his amazing brilliance, thought the economic good times would last forever, so here we are. That's a guess thinking there was rationale behind it, but this being Daley, you could argue this was also a way for friends to get paid.
Chicago's bond rating sucks. There are basically 10 levels/grades of investment grade bonds. Aaa bonds are the top of the heap with Baa3 at the bottom. Below that? 10 levels of junk bonds. Moody's downgraded the city back in March from A3 to Baa1 (going from 7th to 8th on the investment grade bonds.) NYC is Aa2, or 3rd on that bond rating. Dropping the city two bond ratings puts Chicago a cunt hair above junk bond status. And if you think it's bad now, wait until it hits Baa3. It's not a question of if, but when.
Detroit's bond rating was basically the same as Chicago's in the 70's through 2005 (Baa with some years in Ba - the top of the junk bond category). What kicked it into high gear was people fled Detroit - when 25% of people leave in 10 years, you're screwed. Until you see that mass exodus, Chicago won't collapse as quickly like Detroit.
Further lowering of the already lowered ratings is the first domino falling that triggers a financial shit storm for the city and they are in full panic. Fortunately the banks that agree to accept the lowered ratings can be easily rewarded through fees on future bond sales. Your equipment may come from the lowest bidder but that's not the case for banks getting fees from bond sales. City just picks them. No bidding, no competition no problem. It's like if you have a 15 yr mortgage and then refinanced to a 30 yr and then again to 50 yr and then to 75 yr. The debt never goes away but you can lower your payment each time you extend it further. House of cards and the wind is strongly pickin up.
Aren't we all friends here? Doesn't one of the Daley brother work for the banks? You know the one who looks a little slow? Wait a minute. That describes all of them.
Take it out of the fat midgets pension.
And you think this is somehow a problem for Mayor Shitstick?
This is what's known as "the long con".
This is just another part of the grand setup being used against pensioners in Chicago, another line number in the affirmative defense to be set up by Corp counsel in response to the constitutional legal challenge on the way and the many more to come as the con artists set up every possible bullshit scenario and excuse for violating the constitution and stealing more money from pensioners than they already have.
Notice how you hear nothing about the revenue the CASINO will bring in, or the revenue from LEGALIZING POT FOR MEDICAL USE?
Yeah.... you'll hear NONE of those cash cow revenue generators being discussed before the cases are heard.
No, what you'll hear is all the setup bullshit to attempt to leverage AGAINST pensioners, and now they've set it up so their old pal Moody's appears to hold all the cards, of which you know as fact Emanuel and the criminal elected set runs Moodys.
So, within the next few days or whenever it's most beneficial to the criminals, a statement from Moody's exclaiming how they're going to lower Chicago's credit rating once again if they don't porchfuck Fire, Police and Teachers pensions will be forthcoming.
Bet on it..... it's the grand setup.....and they're using all their buddies to set it up just right.
In this order:
KILL THE ILLEGAL TIF FUND SCAM
Build the FUCKING CASINO
Let the fucking POT dispensaries run
This city will have restored ALL it's ability to fund ALL constitutionally and lawfully protected obligations required of it and then some.
But that doesn't make the Rauner's of Chicago richer now does it?
Did JP Morgan sell the swaps to Daley? Daley's brother was a VP there.
I've yet to see a Democrat who can make hard choices.
Except Hillary Clinton of course...
...Just kidding.
Will this affect my LINK?
"Credit default swap". another term from the casino style banking during the 2008 crash.
Interest rate swaps are usually a good way to protect against rapidly rising rates. Most companies like to have some certainty on their interest costs, particularly for long term debt. The catch is, when you are the Bank and your counterparty (the City) tanks, you want to be able to tear up those swaps. That means the city has to pay up. This is a mess. Or if it isn't, it'll do until the mess gets here.
Simple answer strangely all this is released during the pension talks you know where the elected used the family and friends plan and looted the pensions! They should all be in prison!
There is an easy explantion. Call the realtor because we're fucked.
“All of these were done before the current administration,” Koch said. “I’m not here to argue with whether that was good, bad or indifferent. What I can tell you is we don’t do it, and we basically stopped doing it when the mayor took office.”
Yeah, yeah, yeah. No matter how bad the shit gets, Mayor Murder and his band of dufus' will never directly point the finger where it belongs: DICK daley.
TIME TO RAID THE TIF FUNDS - AFTER ALL, ITS OUR MONEY.
Daley messed this city up beyond belief. But he's smiling all the way to the bank.
2:42......
Rahm knows everything that Daley did.
It was all done by design. Collusion between Daley and the pirate financial class to rape Chicago.
News Flash - He doesn't give a fuck! His job is to vacuum up anything left and get the fuck out of here for greener pastures, period.
11th ward still rules , nora conroy daley is our next mayor the daley crime saga continues
So rahm should show goodwill with our retro
This is as serious as a heart attack.
Essentially you pay a fee to exchange (Swap) a floating interest rate for a fixed interest rate. If your credit rating falls, the floating interest rate spread will increase, reflecting the increased risk, so the party with whom you entered into the Swap agreement will demand a payment to compensate it for the increase in the floating interest rate.
Anonymous said...
Worse than Detroit.
6/18/2014 01:16:00 AM
--------------------------------------
Awesome tune from Robert Plant's first solo album, "Pictures at Eleven".
Why is there a park for Mags Daley. She had no respect for those that kept her and her family safe. She use to have the police wipe her dogs ass after it took a shit. If the police officer failed to wipe the dogs ass to the satisfaction of her ass inspection she would have him or her sent back to patrol. Totally true she nor Richie deserve any type of monument. There should never ever have a drop of Daley blood elected again!
If it takes 9 slides in the article to explain how these work, do think dopey Daley understood it? That jagoff destroyed Chicago. He left a carcass and yet they keep naming landmarks after him. It kind of reminds of that dead woman all propped up at her wake to look like she did when she was alive. That's Chicago today.
I've been buying cat food in bulk to prepare for a life without a pension. I suggest you do the same; unless you prefer dog food.
Here's another way to look at it. Let's say that after you get your paycheck, you're $100 short for the month. Instead of doing what a rational person does and stopping spending, you buy $100 of lottery tickets on credit. Now you're $200 in the hole. You scratch off the lottery tickets in hopes of winning $200, but instead you win nothing. This makes you an asshole, and you should run for mayor. If you get so mad that you shoot out your porch light, then you might be a better candidate for Police Superintendent.
I wonder if these "swaps" were in any way tied to the "LIBOR" rate?
The "LIBOR" rate is an interest rate that the major banks have been caught manipulating.
Perhaps that fact can make these "swap" agreements null and void.
For Daley to put us in to something like that is FUBAR. But we know how it probably went down: No-bid, insider undewriter (where was Rahm during all this...in the Investment Biz making millions), kick-backs.
These banks did to Daley/Chicago what they did stuffing peoples mailboxes with pre-approved credit cards.
The bankers today are greedy, kleptocratic, crony- capitalists.
For them its socialism for them and capitalism for the rest of us.
I'm not anti-capitalist. I'm anti crony-capitalist.
We bail them out after they trash our economy with "Derivatives" and "Swaps" that are a suckers bet unless you're in the club or using other peoples money and then they go right back to fucking us again.
There Derivative positions now are greater then they were before the '08 crash.
Here's a little banking lesson for those who are otherwise un-aware.
Banks make money creating money from debt. That's why they love to get dupes like Daley to sign on to debt.
Not sure exactly how it works with swaps or derivatives but with an auto or home loan, it works like this:
You borrow say $10 at 10%. So, you owe the bank the $11, $10 borrowed, plus $1 interest.
"Fractional Reserve Banking" (look it up) allows the bank to create 7-10 more dollars out of thin air for every -- dollar -- of debt somebody signs-up for without the bank owners putting any of their own money in.
So from your $10 loan that you backed by your skin/assets, the bankers, at a 10% rate of interest pocket another $7 by virtue of the $70 they created out of thin air without ANY out-of-pocket cost to themselves and loan to others. The money created and interest income gets exponential as the more debt people are signed-up for the more banks have to loan (money created:Inflation) and profit.
Then they loan to someone else the signed up for $10 of debt, plus Interest -- and then -- they create another $70 out of thin air from the $10 of debt they got another guy to sign-up for.
Rinse & Repeat.
That's why they are Debt Pimps. Thats why since the inception of the FED inflation (of Dollars in the system) has made a dollar today worth something like 2 cents compared to the purchasing power of a dollar in 1912.
In the closed-loop International Banking system it works well financing society and industries, when you don't create inflation -- and -- DEBT (Why does a soverign country pay vigorish to a private bank, the FED when it can print it's own money?).
As a Banker how the fuck can you go broke with a scheme like that???
When you're a fucking greedy pig.
What the banking crime cartel has turned Fractional Reserve Banking in to with Debt, Derivatives & Swaps is a RICO racket mob casino.
Now they don't create 7-10 dollars of money out of thin air for every dollar of debt they sign people up for. No now its more like $20-$50 for every dollar of debt put on the books.
My factoring may not be accurate but the scenario is.
When you sign a loan you are putting more $ in that Bankers pocket then the interest rate. You weaken the country and you reduce the value of a dollar.
When a society goes rouge with debt, prices for everything goes up and bankers get fat.
Try to never put yourself in debt where you can't walk away from the deal.
They love it when they own you.
-Citizen
Yup...
The local media has all their investigative reportin' prowess digging to get to the bottom of all the financial fuckery in Chicago over the last quarter century.
Can't wait for the headlines...
-Greedy Union Member Cops Responsible For City Financial Problems!-
-Rahm Says "Only Police & Fire Pension Reform Can Save Chicago Now... It's For The Children."-
-Rauner, Msall & All The Other Rich NORTHSHORE Dudes say "Chicago Cop Pensions Too Cush - Need To Be Reformed."-
Just curious... These goofs don't live in Chicago but damn do they jaw-jack a shit ton about what THEY think a Policeman ought to have...
If you haven't had to fight for your life in a pissy stairwell in the "projets" or in other garden spots of this city, (garden spot being roughly equivalent to mold growing on a turd) your opinion on "what you cops should get" should consist of genuflecting on the tops of your shoes in gratitude that there actually are such strange and interesting men called "The Chicago Police."
Forensic audit
(OT) went to get the overpriced city sticker at the archer and Laramie location, line out the door,not enough employees as usual, but wait I see an elected girl out there shaking hands,and people in line thanking her for this sale, wait we have to wait in line so you can extort money, amazing another office that really needs to be eliminated city clerk sue Mendoza, huge budget but you duplicate revenue I know the city clerks job is really a do nothing job, and it's a stepping stone to either prison or higher office again we need it why?
Anonymous said...
I spent an hour looking this up ("credit default swap") and I didn't understand it. The Suntimes video doesn't help explain much (my thinking is if the Suntimes can't do basic journalism, they can't explain complicated financial transactions.) From an investor's standpoint, it is actually a tempting thing: betting on Chicago's failure to pay bills.
6/18/2014 04:37:00 AM
A credit default swap (CDS) is simply an insurance policy on the bonds/financial instruments defaulting. If they default or the bondholder (purchaser) is in danger of losing money, they cash in the CDS (swap) for the bonds and get their money. This was behind the mortgage collapse. European and worldwide investers were shaky about buying bogus USA mortgages packaged together as bonds so Wall Street started selling CDS's to guarantee the bonds, no way could the purchaser lose money. Plus Wall Street made billions in fees selling the CDS's.
When people couldn't pay those mortgages the bondholders cashed in their CDS for money. The large Wall Street firms had to pay up (Lehman Brothers) and they were all in danger of collapse because they all sold more CDS than they had capital to cover.
Lehman Brothers did go belly up and others were forced to merge with healthy banks. The Huge insurance company AIG also was in those CDS way way over it's ability to pay and when they had to start writing checks for tens of billions they too were in danger of collapse. The trouble they had their financial tentacles all over the world. GE Finance for instance. Big banks stopped lending to each other, not knowing who was solvent and who wasn't. GE makes light bulbs, refrigerators, jet engines etc but it was their finance arm that brought the entire business almost to a halt.
That is why the US Government had to infuse all these firms with hundreds of billions of bucks or else watch the entire USA economy go down the tubes in a week or two.
The trouble asset program gave billions to banks to get capital into the system and the economy moving again. Even healthy banks that didn't want the money and didn't need it were forced to take it so as not to single out the weak ones. (Chicago's Northern Trust was healthy but was forced to take the money and lend it out, they paid back in the minimum time.)
CDS were the so-called financial instruments of mass destruction. More were sold than there existed cash in the entire US economy. If China or Russia stopped buying our bonds the USA economy would be in a depression now many times worse than the 1930's. The depression then was not due to the stock market crash exactly, it was because no one was lending money to the little guy to keep their farm running or hardware store going and small local banks were wiped out along with people's life savings.
Then in the 1930's the government stepped in and made strict banking regulation laws and things gradually improved. Then people forgot about the depression and Wall Street argued to eliminate those same banking regulations that safeguarded our economy. They won, the banking industry was deregulated and by and by that led to the cluster fuck of 2007-2008.
The irony now is that there is still no regulations safeguarding that from happening again and all the big banks are now bigger than before. The Wall Street investment banking industry is kaput. Now regular banks like Chase own all the big former investment banks and operate essentially unregulated, again.
And God forbid anyone mention the Dem----- or Rep------ Party because then we will get into a liberal/conservative shit slinging match.
Believe what you want to believe.
LOL, as I'm reading this post, Shortshanks himself just walked past me. Always warms my heart to see the little fella.
daley is an idiot just like the rest of the 11th ward inbreeds
Bernie Madoff and the Five Crime Families in New York have something to say to the extended Daley Family..........
Well Played.
G--d admit, how about putting in some of those TIF funds?
Oh my, demands on payments due !
"... the administration could be forced to pay the biggest sums to Wells Fargo and to a subsidiary of Chicago-based Loop Capital Markets, led by Jim Reynolds, an Emanuel appointee to the Illinois Sports Facilities Authority and World Business Chicago...Wells Fargo would be able to demand nearly $40.9 million and Loop Capital claim more than $34.3 million, records show. A spokesman for Wells Fargo declined to comment. Reynolds did not return calls."
— The benefactors all Daley-Rahm pals will get paid, and have already made their millions. Look up Loop Capitol & their client portfolio. Do you think any of the anointed Chicago connected have had profitable investment ties to LC?
Anonymous Anonymous said...
11th ward still rules , nora conroy daley is our next mayor the daley crime saga continues
6/18/2014 09:52:00 AM
Hahahahaha!
Believe what you want to believe.
6/18/2014 03:17:00 PM
Bravo for an excellent commentary that shows how dangerous the CDS is to everyone's financial health. With the banking industry left unregulated, it is only a matter of time for this whole scenario to re-enact itself.
For a good read on the subject, I would recommend the book, "Reckless Endangerment" by Gretchen Morgenson and Joshua Rosner.
The Daley-Emanuel death spiral continues.
This is a good vid on how credit default swaps work.
It's something everyone should watch.
www.youtube.com/watch?v=ccaCl1GKdJ0
We need to understand how some bankers are fucking us.
BCP we gotta talk. Really.
"More Financial Mess from Daley"
Hey!
Maybe some of the Occu-Tards can hit Shortshanks with a Whole Foods bag full of shit?
Or just as well, the Shit-Sock Man...
>WHAP!<
Why is the entirety of Chicago's "Who's Who" in politics, business and media so squeamish about outing Shortsbanks as the primary wearer of the shitty drawers of responsibility for this city's financial and criminal problems?
Because they were up to their shoulders at the feeding trough?
Longing to see pinstripe clad asses flung from high windows when the Great Correction comes...
Anonymous said...
This is a good vid on how credit default swaps work.
It's something everyone should watch.
www.youtube.com/watch?v=ccaCl1GKdJ0
We need to understand how some bankers are fucking us.
6/18/2014 10:53:00 PM
NEVER FORGET!
These are the bastards who fought/lobbied Capitol Hill against the original stimulus/bail-out which was to put money in the pockets of the middle class...
"Don't give that money to the churls! All they're gonna do is pay off/pay down debt to get us out of their pockets. Give it to us... We promise to pass the savings on to them!"
Not a single one of these collusive, treasonous, financial turn-coats went to prison for what happened.
Mass hangings will true be citizen taxpayer justice.
And now Daley and his bitch kid are running around trying to transfer anything that's not bolted down to the fucking Chinese.
The only sad thing when this asshole dies is that he won't be wearing an orange jumpsuit and pushing a broom around a prison cafeteria when it comes.
Not a fan of rahm, but the medias beloved daley left him with a giant bag of shit.
nothing to worry about in a couple years rahm will be gone and nora conroy daley will be mayor, the 11th n 19th wards run it.
It's obvious what happened here.
Daley and/or the banks know that the city isn't going to have an increasing credit rating. So they set up this bet. The banks cash in, Daley and crew get their cut (in some totally legal way that can't be traced back to this). The taxpayers pay.
They hide this inside the interest rate swap as a condition It's too brilliant to be an accident. At the very least the banks knew it.
Never ask a shithead journalist to explain finance. Credit swaps are private contracts between parties. One party, in this instance Daley’s Chicago, received a financial benefit, such as a lower interest rate, bond insurance, a break on fees, or a cash payment, in exchange to agreeing to certain terms. In 1999, the banks likely recognized that financial markets were at high valuations rarely experienced before and commodity prices, especially energy, were at their lowest levels in a generation. The bet the bankers made was that when all of this reversed to typical valuations, the Chicago socialist politicians would neither raise taxes in a recession nor drastically cut services to balance the budget. They would instead borrow more money to provide the same services like in the good old days and defer pension payments, despite looming retirements of baby boomers.
Rahm claims no responsibility but in his last budget, he borrowed more than $300 million to meet day-to-day expenses. This is all to say that starting with Daley and continuing with Rahm, the city has spent more money than it has received in revenue. The continued borrowing of money to cover revenues the city does not have led to the credit downgrades. As SCC has pointed out many times, new sources of revenue never are applied to pension obligations. The politicians hope the pensions will just magically go away.
Now the banker’s bets are paying off. They sniff another recession in the wind. This shallow economic recovery has lasted longer than most. When revenues coming in to the city in the next year and a half tank, the banks are continuing to bet the dufuses at city hall will refuse to make hard choices in getting their fiscal house in order. When they pile on more debt and refuse to deal with pensions meaningfully, credit ratings will be downgraded again. This will enable the bankers to really get rich and Rahm to act like a victim even though he helped create this mess as he continued to borrow to cover revenue shortfalls.
The banks are waiting to come in for the kill. We are all fucked.
Anonymous Anonymous said...
nothing to worry about in a couple years rahm will be gone and nora conroy daley will be mayor, the 11th n 19th wards run it.
6/19/2014 03:53:00 PM
Dream on, Nora. Dream on.
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