Illinois was in the national spotlight this week for taking action to hold Wells Fargo accountable for defrauding millions of customers. Illinois state Treasurer Michael Frerichs, Chicago City Treasurer Kurt Summers, and the Chicago City Council took action by withdrawing city and state funds and financial business from Wells Fargo. The move received coverage in the New York Times, USA Today, Wall Street Journal, Forbes, Bloomberg, CNN, LA Times, and Chicago Tribune.
Governor Rauner also made an announcement about the state’s business with Wall St. Banks this week. On Tuesday, just prior to a scheduled press conference by SEIU Healthcare, the University Professionals of Illinois, and Grassroots Collaborative regarding the state’s toxic swap deals, Governor Rauner announced that he had reached agreements with five Wall Street banks holding interest rate swaps with the state of Illinois. But the Rauner administration isn’t releasing the terms of those agreements to the public.
In a release about the agreements, the Rauner administration repeatedly talks about mitigating risk and limiting the state’s exposure. Chicago Mayor Emanuel used very similar language to describe his actions regarding Chicago’s swaps just months before the swaps were terminated, costing Chicago taxpayers $400 million in fees. Governor Rauner has hired the same advisors used by the Emanuel Administration.
Also of interest, nowhere in Rauner’s statement does the administration claim that the new agreements will save the state of Illinois money. Is Governor Rauner the most modest elected official in the state? Or are there are no actual projected savings?
Based on what the administration has told the media, it appears that Governor Rauner renegotiated the credit rating trigger, a threshold that when crossed, causes the swap to terminate, incurring penalty fees. However, if the Governor does not take action to renew the Letters of Credit connected to the swaps, which are set to expire on November 27th, the swaps will still terminate, costing Illinois taxpayers close to a billion dollars. Rauner’s announcement may do little more than push an $870 million payout to Wall Street banks until after the election – which may have been exactly his intention.