Posted on 03/24/2010 5:32:09 PM PDT by TigerLikesRooster
Bank seizes money from school districts embroiled in risky investments
By Amy Hetzner of the Journal Sentinel
Posted: March 24, 2010 7:06 p.m. |(1) Comments
A European bank that loaned money to five Wisconsin school districts that made risky investments has seized $5.6 million from district-controlled trusts to try to compel district officials to repay the debt.
DEPFA Bank took the action earlier this week after a year of fruitless efforts to work out a restructuring of $165 million worth of loans to the district trusts that have been in technical default for more than two years.
"We are taking the steps that we can take and we are very much interested in restructuring the loan," DEPFA Bank spokesman Walter Allwipher said Wednesday.
Officials with the school districts - Kenosha, Kimberly, Waukesha, West Allis-West Milwaukee and Whitefish Bay - used the borrowed money plus other existing or borrowed assets to purchase $200 million worth of complex investment vehicles called collateralized debt obligations.
The districts had planned to use quarterly interest payments from the investments to help fund non-pension retirement payments, with the expectation that the full amount of the investment would be returned to them after seven years and used to pay off their debts to DEPFA.
(Excerpt) Read more at jsonline.com ...
P!
And so it begins....
Milwaukee, another heavily BLUE area.
Not as blue as People’s Republic of Madison.:-)
“been in technical default”
As opposed to real default?
Contracts in America aren't worth the PDF files they're published in.
real default is not making your payments, technical default is violating some other term of your agreement. It would be interesting to know what put them into technical default.
Thanks. I figured default was default.
If they seize your assets, I’m thinking that’s real default!
FYI Ping
Yeah right, next thing they will want is to be compensated for every thing confiscated by Wilson and Roosevel for cryin out loud. Get over it. You lost the wars and thats it. Keep lendin us your money and STFU.
This from ‘investment U’ article in June 2007;
Risky Collateralized Debt Obligations Make Toxic Investments
Over the past few years, subprime mortgages became not just loans to people with less than stellar credit. They became loans to people who were such poor credit risks they had no business buying a house in the first place.
“Thank God we’re selling these mortgages off as soon as we write them,” Jim added.
So who buys these crummy mortgages? The folks on Wall Street. But not for themselves, of course. They find unique and innovative ways to package and resell them to Mom and Pop.
More specifically, Wall Street takes pools of mortgages and turns them into securities known as collateralized debt obligations, or CDOs. (Years ago, we used to call them CMOs – collateralized mortgage obligations.) There were $316.4 billion in mortgage-related CDOs issued last year, according to the Financial Markets Association. More than $1 trillion have been issued, in total.
Some of these securities are safe and carry low yields. But many of them are toxic. They carry attractive yields. But they are not attractive investments. Most of them are risky, poorly understood, thinly traded and prone to going bump in the night.
If your broker has sold you a high-yielding CDO, sell it at market today. There’s a good chance the price of these securities is going to get a whole lot worse before it gets better.
Your word is your bond.
Not in this country
Just tell the bank, “You don’t have to get so snippy about it!”
Just tell the bank, “You don’t have to get so snippy about it!”
_____________
You don’t have to get all ‘wee-wee’d’ up
We take it outta obama’s stash money
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Just when you think you've heard it all about public schools, reality smacks you upside the head.....
Well......ya. I can’t argue with that.
Thank you for understanding
“Where’s the problem? The $$$ was borrowed and now the lender is seeking repayment. “
I dunno, was a court involved?
This brings to the fore another needed plank for conservatives to harp upon:
Most elected officers of government simply lack the brains to commit public funds to complex investment instruments. They’re just too stupid.
There, I said it. Lots of elected officers of government are stupid. Everyone can groan as if I farted at a garden party, but I’m a blunt man who has a habit of swilling beer at garden parties, with predictable results.
These are not the only cases of local or state officials making investments in complex instruments that didn’t pan out. CalPERS is justly infamous for their investments in dubious instruments with awful timing. County officers in places like Mississippi and Alabama have made bets with swaps that are insane, given the lack of financial acumen of the elected officials and local appointed managers.
The result is always the same: the taxpayer gets screwed - twice: first, for the losses on the position, second to replace the losses to public employee pension funds and other obligations.
One of these days, the GOP could make some minor hay out of making it a party plank that Republicans won’t invest public monies (at any level of government) in complex, obscure and illiquid securities that end up costing the taxpayers yet more money.
In Nevada, the state government had what I thought was a particularly good law on this topic: no investments worst than A2, nothing that isn’t US government or agency debt, nothing with time horizons more than 5 or 10 years (I don’t remember which just now). Sure, the Nevada PERS managers complained about the lack of yield... but I’ll bet they’re now looking at CalPERS and thinking “We’re so happy that we invest in only boring paper...”
“One of the reasons the US was held in so high a fiscal regard is because the US government continued to pay the debts owed to British businesses while we were fighting the British during the War of 1812.”
Thats laughable. The major banks and other financial institutions were making money hand over fist and were lying to do it.
Of course they were. That’s what banks do. So what’s your point? Don’t pay the contracts you sign? Default on everything you don’t feel like honoring? Watch the economy collapse?
“Of course they were. That’s what banks do.”
Banks lie? yes they do
“Watch the economy collapse?”
I doubt my little amount will cause the economy to collapse if I stopped paying. The trillions in funny money created by banks just might though.
These big banks knew what they were doing but felt greed was the better answer. The regulators knew what the banks were doing and encouraged it. It really has nothing to do with the end consumer except they were the pawns being used.
Well,there were certainly lawyers involved when the loan agreement was signed.Perhaps there's no need for court involvement at this time.If the banks in question have acted contrary to the terms of the agreement or contrary to state or Federal law than the school district should take it to court.Otherwise,they should shut up and pay up.
“Perhaps there’s no need for court involvement at this time.”
No actually they probably do need a court. Banks make mistakes all the time. I know you are aware of that because I’ve seen you on the threads.
Screw the banks, they’ve screwed each and every one of us.
What are odds Goldman Sucks sold the paper to them, 5-1?
Yes, it is likely that there has been ‘reputable’ Wall St. firms which peddled this deal.:-)
1) "What could possibly go wrong?"
to be followed shortly by...
2) "But how was I supposed to know?"
(Applies doubly to Obamacare.)
Cheers!
High powered Wall Street bond salesmen have been wining and dining and bribing county pols and hacks for decades. Campaign contributions too. Buying swaps etc is not just due to stupidity though that’s part of it
Nothing like a good example of financial responsibility.... /sarc
No, that's just opening negotiations. And from the story, they aren't looking to get repaid at this point, they just want to re-work the loan so that it appears to be performing rather than having to classify it as being in default.
This is because pension retirement plans are covered by the taxpayer.
Of course the CDOs were purchased with taxpayer bucks also.
yitbos
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