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Despite other entities successfully recovering funds from banks that misrepresented a potential market collapse, Chicago Mayor Rahm Emanuel blew off the idea of Chicago Public Schools doing the same. The Chicago Tribune reported on his response.

Chicago Mayor Rahm Emanuel dismissed the idea in remarks to reporters last month, declaring that “there’s a thing called a contract.” But other bodies that signed contracts in similar situations have, in fact, succeeded in clawing back losses, with banks repaying millions of dollars to governments that issued the same kind of problematic auction-rate debt Chicago’s school system did.

Those borrowers argued that they signed contracts based on misrepresentations by bank officials who failed to disclose that the banks were propping up the auction-rate market, leaving it vulnerable to collapse. When that collapse occurred, in early 2008, governments — including Chicago Public Schools — were charged punishing interest rates.

CPS entered into deals starting in 2003, worth $1 billion. In 2007, before CPS closed the final deal, a Bank of America executive warned of a meltdown in the market. CPS states the bank never shared those concerns. After the collapse, the Tribune estimated that the deals will cost the district $100 million in additional interest costs.

The Tribune was able to verify six settlements with governments or hospitals over auction-rate deals.

One Response

  1. Jesse

    People are getting to GREEDY. You got Rahm, he should give his slush fund/graft money to do the trick, then have the unions pay some back.. But this is not going to happen because of GREED, GREED, Greed. The unions are asking for too much, and so are the people they represent.

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