October 4, 2016
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.”