Indiana University Health: A Case of Derivatives Abuse from the Midwest

A. Rashad Abdel-khalik

Chapter 20 in Brazen:Big Banks, Swap Mania and the Fallout, 2019, pp 273-280 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Indiana University health-related units were incorporated in 2011 as a nonprofit private corporation named Indiana University Health, Inc. (IU Health). IU Health owns and is affiliated with more than 20 hospitals and health centers throughout the state of Indiana, including the Methodist Hospital, Indiana University Hospital, and Riley Hospital for Children. In addition, IU Health provides the teaching facilities for Indiana University’s medical school. Like most nonprofit entities, IU Health obtains part of its funding from the municipal-bond market. It maintained the tradition of issuing bonds at fixed coupon rates until big banks promoted the presumed, and hopeful benefits of lowering the cost of borrowing when a variable-rate bond is coupled with swap contracts. Swap dealers and underwriters from big banks eagerly helped IU Health do both: issue variable-rate bonds and concurrently enter into swap contracts to pay fixed and receive adjustable…

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
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