Wall Street as an Eleemosynary Institution

You did know, of course, that while Wall Street is the home of capitalism, it is also the centre of generosity and kind-heartedness. Wall Street bankers are the secret Santas of the American economy. Those guys making half billion dollar a year bonuses are part of a secret eleemosynary institution run by Wall Street.

Proof? Here's an article from the NY Times written by Gretchen Morgensen:

In the spring of 2008, the Denver public school system needed to plug a $400 million hole in its pension fund. Bankers at JPMorgan Chase offered what seemed to be a perfect solution.

The bankers said that the school system could raise $750 million in an exotic transaction that would eliminate the pension gap and save tens of millions of dollars annually in debt costs — money that could be plowed back into Denver’s classrooms, starved in recent years for funds.

To members of the Denver Board of Education, it sounded ideal. It was complex, involving several different financial institutions and transactions. But Michael F. Bennet, now a United States senator from Colorado who was superintendent of the school system at the time, and Thomas Boasberg, then the system’s chief operating officer, persuaded the seven-person board of the deal’s advantages, according to interviews with its members.

The Denver school board unanimously approved the JPMorgan deal and it closed in April 2008, just weeks after a major investment bank, Bear Stearns, failed. In short order, the transaction went awry because of stress in the credit markets, problems with the bond insurer and plummeting interest rates.

Since it struck the deal, the school system has paid $115 million in interest and other fees, at least $25 million more than it originally anticipated.

To avoid mounting expenses, the Denver schools are looking to renegotiate the deal. But to unwind it all, the schools would have to pay the banks $81 million in termination fees, or about 19 percent of its $420 million payroll.

John MacPherson, a former interim executive director of the Denver Public Schools Retirement System, predicts that the 2008 deal will generate big costs to the school system down the road. “There is no happy ending to this,” Mr. MacPherson said. “Hindsight being 20-20, the pension certificates issuance is something that should never have happened.”

A spokesman at JPMorgan, which led the Denver deal, declined to comment. Royal Bank of Canada, which acted as the school system’s independent adviser even though it participated in the debt transaction, declined to comment.

I'm perturbed that a big Canadian bank participated in this "leemosynary" act that has effectively raped and pauperized the Denver school board. Wall Street... well what else would you expect. These guys are sharks. But the Royal Bank of Canada. Why would it act as a front man to the sleazy capitalists from Wall Street? Oh... the money. Now I get it. Bankers are the bagmen of capitalist crimes. I'm a fool to think that a Canadian banker has any traits of a normal Canadian. Nope... bankers are a breed apart. Mixing bankers with ordinary people is like putting sharks into a pool of goldfish.

Here's the "bottom line" on Wall Street helping government institutions:

Financial stress from these deals could not come at a worse time for cities, towns and school districts already saddled with high costs and falling revenue. Although it is difficult to tally how many public entities entered into interest-reduction deals, a recent analysis by the Service Employees International Union estimated that over the last two years, state and local governments have paid banks that arranged these transactions $28 billion to get out of the deals, seeking to avoid further crushing payments.

Gretchen Morgensen has done a great public service by exposing the true shark nature of Wall Street. You know, the guys who work so hard that they get billion dollar "bonuses" for their "eleemosynary" acts!