Catalyst notes CTU involvement in work against 'toxic swaps'...'...What is really troubling to Bhatti is that CPS hired an outside firm to do an analysis of these deals to justify getting into them, rather than to consider the options for getting out of them...'
As the Chicago Tribune continues its major investigation into the use by Chicago Public Schools of variable rate bonds and other exotic "financial instruments," another publication notes the for years the Chicago Teachers Union has spoken out against the deals. While Catalyst knocks the Tribune for being tongue-tied about the CTU's role in the fight against the swap deals, Catalyst continue to ignore the historical record which shows that Substance initiated the fight after studying the CPS budgets more than five years ago.
Saqib Bhatti of the Roosevelt Institute told the September 24, 2014 meeting of the Chicago Board of Education that the Board might be able to recover the tens of millions of dollars it is losing because of the "toxic swaps" by going to arbitration. Instead of welcoming Bhatti's suggestion, the Board members devoted their time to explaining why they were NOT going to arbitration. With the subsequent publication by the Chicago Tribune of the history of the variable rate bonds, it became clear why CPS was stonewalling on an arbitration that could save the school system tens of millions of dollars. They are covering up for David Vitale. Substance photo by George N. Schmidt.CATALYST STORY:
Take 5: CTU's fight against risky financial deals, ed policy under Rauner
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By: The Staff of Catalyst / November 10, 2014
Chicago Teachers Unions leaders have repeatedly warned about the district�s high-risk financial dealings. Now, the Chicago Tribune weighs in with a story on �auction rate� swaps that will cost the district about $100 million more than it would have using traditional, fixed-rate bonds.
The story -- part of a series that continues this week -- says that financial advisors did not clearly spell out the financial risks, at least according to the documents the district turned over after the newspaper hired attorneys. The interest rate swaps and the auction rate swaps are part of the same series of deals, says Saqib Bhatti, a fellow at the Roosevelt Institute who has been providing information to the CTU about the swaps.
In fact, the Tribune has nifty little videos explaining how these deals work. So far, though, the Tribune hasn�t mentioned that the CTU has been harping on these deals for years, though Bhatti says he was interviewed by the reporters. In an interview with Catalyst Chicago, Bhatti says that it is clear that the banks misled district officials and that they could join other government agencies who have sued over them. �It is clear that CPS dove in head-first and went deeper than other borrowers,� Bhatti says. �Now that we can see what happened we need to try to get out of these deals.�
The district disagrees with the Tribune�s analysis, and the main financial advisor highlighted in the article accused the reporters of singling her out because she�s a woman. David Vitale, a top district administrator at the time the debt was approved, championed the complex financing method and told reporters he understood the risks. �I am not a neophyte,� he said.
What is really troubling to Bhatti is that CPS hired an outside firm to do an analysis of these deals to justify getting into them, rather than to consider the options for getting out of them.
Comments:
By: George N. Schmidt
Debt, mayors' tax lies, progressive taxes now
Beyond the swaps, the Board's debt is the real problem -- the elephant in the pup tent -- that the Board has been prattling around for years as it mendaciously outlines its "budget problems." It's not the pensions, a valid legal obligation, but the way in which the Board of Education, under both recent mayors, was allowed to increase all kinds of debt to unconscionable levels in order to save both mayors (Richard M. Daley, Rahm Emanuel), reactionary Democrats, by the way, from having to "raise taxes" (especially on the rich, super rich, and superest rich). They've exhausted their bag of tricks, just like the college student who thinks that her credit card limit is an unlimited way of spending -- rather than a dangerous opportunity to make others (the banks issuing the cards, like Bank of America, the same ones who are milking CPS with the toxic swaps).
As many homeowners in Chicago have noticed since the Reign of Rahm began in 2011, now we've added radically decreased services to everyone (except the Gold Coast and north side Lakefront) and increased costs and fees on EVERYTHING from those infamous Red Light Cameras to the price of water for homes (and even churches). But for our tax dollars, what we get are increasing propaganda departments, not only at CPS (where the propaganda dept. is now headed by a guy being paid $160,000 a year who was sent over from City Hall) to City Hall (where the multi-million dollar "Mayor's Press Office" stages daily media events to promote the Mayor's image)...
By: Jay Rehak
The toxic swaps are making others rich
The fundamental question is this: Were those who entered into these toxic swap agreements complicit or incompetent in their dealings with the banks who PROFITED from CPS's actions.
In the end, no amount of public relations efforts can mask the fact that these deals will continue to bleed the "cash strapped" Board of Education for years to come unless it can be proven that the men and women who entered into these agreements acted illegally and the "deals" can be abrogated.
The fact that the Board of Education did not have anyone on its school board who looked into this and reported it to the public years ago is one more reason an elected school board is necessary.
While it is possible an elected school board would have also chosen to turn a blind eye to the toxic swap deals, it is more likely at least one elected board member would have had the courage and willingness to speak out in a timely manner.
Clearly, an appointed school board is more likely to choose a "see no evil" political expediency over a more honest and open review of poor (possibly criminal) financial mismanagement. This is because an appointed board member serves at the pleasure of the politician who appoints him/her, while an elected school board member's serves at the will of the voters.
Chicago remains the only place in the State of Illinois that does not have an elected school board. As Substance has pointed out for many years, and the Tribune discovered this month, an appointed school board has cost the City of Chicago hundreds of millions of dollars. It's time the citizens of Chicago elected their school board like every other district in Illinois.