Gov. Rauner’s announced agreement on swap payouts to Wall Street banks lack details

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October 4, 2016

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nathan@grassrootscollaborative.org

Gov. Rauner’s announced agreement on swap payouts to Wall Street banks lack details

Coalition of educators and human service providers skeptical, demand disclosure of agreement terms

SPRINGFIELD, IL – This morning, Gov. Rauner reacted to Illinois educators and human service providers who had gathered for a press conference to call on the governor to prevent a near $1 billion payout connected to toxic interest rate swap deals with big banks.

A last minute press release by the governor’s office said the state had reached new agreements on the swap deals that would “reduce the state’s financial risk.”  However, the release raises many questions.  It claims that “the new terms are more favorable to the state” but provides no details about the new terms or if the agreements save the state money.

“We want to see the terms of these new deals. Taxpayers deserve to know what the Governor has negotiated and if it benefits them or big Wall Street banks like JP Morgan Chase,” said Amisha Patel, Executive Director of the Grassroots Collaborative. “There is too much at stake for us to just take the governor at his word. Illinois taxpayers have already had more than $670 million taken away from our schools and universities and critical services like childcare, senior services, and violence prevention programs, in order to pay for Wall Street banks’ profits,” she said.

Organizers said any action that Governor Rauner has taken around the interest rate swaps and letters of credit is a result of the pressure they had put on him to stop paying Wall Street banks while universities and social services starve for funding.

When asked about the news from the Governor’s office, Saqib Bhatti, author of “Turned Around: How the Swaps that were Supposed to Save Illinois Millions Became Toxic,” commented, “The devil is in the details.  Mayor Rahm Emanuel made a similar announcement when he renegotiated toxic swap deals.  A few months later, Chicago taxpayers had to pay $400 million in termination payments. We won’t know the potential impact of Rauner’s agreements until we see the actual terms.”

Notably, the statement from the governor’s office does not offer any detail about the status of five Letters of Credit that are attached to the swaps that were renegotiated.  These Letters of Credit will expire on Nov. 27th, 2016, triggering a massive payout of nearly $1 billion that would have to be diverted from already hurting education and human service programs.   The Governor’s statement merely says the priority is to “renew or replace” the letters of credit.

John Miller, President of the University Professionals of Illinois Local 4100 said about today’s announcement, “We need to see these agreements.  And we need an announcement from the Governor that he is currently negotiating with the five banks in question.  Our state cannot afford a $1 billion payout to big Wall Street banks while our college students are leaving the state, because they don’t know if their university will be open two months from now.”

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secmeeting

Legislators and Community Leaders Meet With SEC

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CHICAGO, IL – On Friday, State Representative Andrade, Chicago Alderman Ramirez-Rosa, and community leaders met with Federal Securities and Exchange Commission Regional Director David A.Glockner, and asked that the SEC investigate predatory interest rate swap deals that have caused taxpayers to pay out billions of dollars to Wall Street banks.  

“Right now we have Chicago students who are not getting the investment they deserve as a direct result of these interest rate swap deals,” stated Alderman Rosa. “Chicago and CPS together lost $1.4 billion after being sold these potentially fraudulent Wall Street gimmicks. I sincerely hope that the SEC will listen to us and do what Mayor Emanuel refused to do by taking the necessary legal action to protect our students and our city’s taxpayers.”

For years, Wall Street banks pitched cities and local governments on complicated financial deals called interest rate swaps promising big savings over simple loans. When their promises proved false, cities, states and school districts cut public services and vital programs in order to pay back Wall Street banks.  These toxic swap deals contributed to budget shortfalls that led to schools closing in Chicago, water shutoffs in Baltimore, and devastating environmental and health issues in Los Angeles.  These same bad deals also helped lead to the bankruptcy of Jefferson County, Alabama and Detroit, Michigan.

“Predatory swap deals have a devastating cost in our communities.  Every dollar that cities and states are forced to send to Wall Street banks is money not going towards essential community services. We must intervene to make sure that people are protected over the ill-gotten gains of large financial institutions,” said Amisha Patel, Executive Director of Grassroots Collaborative, following the meeting.   

Action by the SEC could provide much needed relief to the city of Chicago, Chicago Public Schools, and the State of Illinois. Interest rate swap deals have already cost the state $684 million and could cost taxpayers an additional $870 million if Governor Rauner does not renew letters of credit on these deals before November this year.

Erica

Over 88,000 Petitioners Demand SEC Action on Toxic Swap Deals

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On Thursday, Grassroots Collaborative joined with organizations across the country including Americans for Financial Reform, CREDO Action, Rootstrikers and the Center for Popular Democracy to deliver a petition in which more than 80,000 Americans asked the Securities and Exchange Commission (SEC) to investigate the toxic swap deals squeezing cities and states across the country.

The 80,000 petitions were delivered to the SEC’s Chicago Regional Office. At the delivery, State Representatives Chris Welch and Robert Martwick were joined by Alderman Carlos Rosa. Also present were over a dozen community leaders, teachers, and social service providers.

These toxic swap deals contributed to budget shortfalls that led to schools closing in Chicago, water shutoffs in Baltimore, and devastating environmental and health issues in Los Angeles.  These same bad deals also helped lead to the bankruptcy of Jefferson County, Alabama and Detroit, Michigan.  The state of Illinois has already lost over $684 million to Wall Street banks on these deals and could be on the hook for an additional $870 million on November 27th if action is not taken.

In many cases, it appears that banks misrepresented the risk of these deals to cities, or omitted key information, in violation of fair dealing rules. The SEC has the power to order Wall Street to give back any ill-gotten gains if it finds evidence of wrongdoing. On Thursday, taxpayers and elected officials will ask them to do just that.

“These toxic swap deals have cost taxpayers across the country billions of dollars,” said Saqib Bhatti, Director of the ReFund America Project. “Because elected officials like Chicago Mayor Rahm Emanuel have refused to lift a finger to recoup losses, the SEC must act as the last line of defense to protect taxpayers’ interests so that we can fully fund services in our communities.”

“Predatory Wall Street deals are costing Chicago and other American cities billions of dollars,” said CREDO Political Director Murshed Zaheed. “It is long past time for the Securities and Exchange Commission to stop sitting on the sidelines and start protecting our communities from big banks.”

“In many places around the country, big banks appear to have violated their legal obligations of ‘fair dealing’ by overstating the benefits and understating the risks of deals that are now leaching billions of dollars from taxpayers and communities,” said Lisa Donner, Executive Director of Americans for Financial Reform. “The SEC should use their authority to investigate these deals, and to order disgorgement of ill-gotten gains if it finds evidence of wrongdoing.”

“The toxic swaps Wall Street peddled to our cities and towns are part of a parasitic business model that drains wealth from the real economy rather than creating value,” said Kurt Walters, campaign director of the Rootstrikers project at Demand Progress. “The SEC must launch an immediate investigation into how these toxic deals were pushed on our cities and towns – and force bankers responsible for fraudulent sales to return all ill-gotten profits back to the public.”

Erica Rangel, with Enlace Chicago, which operates one of two remaining CeaseFire sites operating in the state of Illinois told the crowd, “Right now the state of Illinois is cutting life-saving programs like CeaseFire, LIHEAP, and Senior HomeCare. The money being used to pay out on these toxic swaps isn’t being pulled out of thin air – it is coming from our communities and our programs. We need the SEC to understand the deadly consequences of these swap deals, this last weekend in Chicago we had 64 shootings. How many shootings could funding of vital anti-violence and social services prevented?”

“Across the country, people are calling on the SEC to investigate a small clique of banks that have drained massive public resources through complicated and likely illegal interest rate swap deals,” Illinois State Senator Daniel (D-17) told Grassroots Collaborative prior to the delivery. “Governor Rauner should not voluntarily pay out on these deals and seek to renew letters of credit with the state to ensure that the SEC has enough time to launch a thorough investigation of these deals. Our money should be going to schools and services not Wall Street banks.”

Photos available here

The petition signatures come from:

CmOy9UpXIAAVaQm

Community Declares State of Emergency in Illinois

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On Thursday, while legislators in Springfield move towards stop-gap measures, a broad coalition of organizations representing residents being hurt by the continued state budget impasse will rally in support of a budget that fully funds the services and programs communities need.

The last twelve months have devastated the state: after-school programs have closed, summer jobs have been cut, anti-violence programs have been dismantled, public universities are at risk of shutting down, thousands of working families applying for child care assistance are no longer eligible, seniors and those with disabilities who apply are not receiving needed independent living services. The lack of a budget and years of disinvestment from vulnerable populations and communities of color has created a state of emergency in Illinois.

Meanwhile, rich individuals and wealthy corporations continue to profit from the budget impasse. Governor Rauner and his top donors like Ken Griffin have received tens of millions in tax breaks. Ken Griffin’s 2015 tax break alone is enough money to pay to restore funding for the anti-violence program CeaseFire and provide home care for 1,570 seniors. On Thursday, community residents will make clear that taking resources from seniors, children, and Black & Brown communities to pay for tax cuts for the rich is unacceptable.

EndBadBankDeals

Failure of Emanuel Administration to Push Through Swap Payments a Victory for Working Families

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The House failed to bring the Fair Tax Amendment (HJRCA 59) to a vote, missing the deadline for placing it on the ballot for the upcoming November elections. The Fair Tax amendment, that would have allowed voters to vote on a constitutional amendment to implement a progressive income tax enjoyed massive public support in both Democratic and Republican districts. By not taking up the amendment, Governor Rauner and House Republicans allowed Illinois to continue to head in the wrong direction.

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Peoples Agenda Cover

The Peoples Agenda, a path to prosperity for all IL families

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The House failed to bring the Fair Tax Amendment (HJRCA 59) to a vote, missing the deadline for placing it on the ballot for the upcoming November elections. The Fair Tax amendment, that would have allowed voters to vote on a constitutional amendment to implement a progressive income tax enjoyed massive public support in both Democratic and Republican districts. By not taking up the amendment, Governor Rauner and House Republicans allowed Illinois to continue to head in the wrong direction.

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Tax Corporations

Failure to Pass Fair Tax Amendment Will Take High Human Toll in Illinois

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News Source:

The House failed to bring the Fair Tax Amendment (HJRCA 59) to a vote, missing the deadline for placing it on the ballot for the upcoming November elections. The Fair Tax amendment, that would have allowed voters to vote on a constitutional amendment to implement a progressive income tax enjoyed massive public support in both Democratic and Republican districts. By not taking up the amendment, Governor Rauner and House Republicans allowed Illinois to continue to head in the wrong direction.

Read more