Jack Wagner’s Mission to Rescue Pennsylvania from the $17.4 Billion Derivatives Mess

A. Rashad Abdel-khalik

Chapter 11 in Brazen:Big Banks, Swap Mania and the Fallout, 2019, pp 187-193 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The Pennsylvania Department of Community and Economic Development (DCED) reported that a shocking 21% of all school districts — or 108 of 500 school districts in the state — and 105 local government agencies in the commonwealth of Pennsylvania had a total of $17.4 billion (notional amounts) in interest-rate swaps tied to public debt between October 2003 and September 2012. No one showed more alarm about the magnitude and spread of these swap contracts than Jack Wagner, the former Auditor General (2005–2009) of the State of Pennsylvania. Unlike any other official, Wagner distinguished himself by taking keen interest in public schools’ use and misuse of financial derivatives, which consisted almost totally of interest-rate-exchange (swap) contracts. The public outcry about swap-related losses surfaced after Wagner’s office discovered how swap pushers from big banks had exploited public school officials’ lack of knowledge about swaps and sold to them large numbers of these complex contracts. In one of his testimonies, Wagner asked the question, “Do the local elected officials who wrote to enter into these transactions really understand them?”…

Keywords: Swaps; Interest Rate Swap; Unconscionable Contracting; Termination Penalties; Embedded Costs; Paying for Nothing; Gambling; ISDA; Master Agreement; Deceit; Inadequate Disclosure; Hidden Costs; Zero Sum Game; Wealth Transfer; Paper Chasing Paper; Floating Rate; Synthetic Rate; Credit Risk; Demonstrations; Water Shut Off; Union Class Action Suit; The LIBOR Scandal; Non-Profit (search for similar items in EconPapers)
JEL-codes: E43 E44 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789813275577_0011 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789813275577_0011 (text/html)
Ebook Access is available upon purchase.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:wschap:9789813275577_0011

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().