By Mike Dunn
PHILADELPHIA (CBS) — City Council is planning hearings into whether Wall Street took Philadelphia and its school district to the cleaners by pushing complicated bond deals called “interest rate swaps”–deals that went sour and cost taxpayers.
In the early-to-mid 2000s, firms like Goldman Sachs and Citigroup touted interest rate swaps as beneficial to local governments. And Philadelphia city government and the school district joined in with what Councilman Jim Kenney says were numerous swap deals. When the recession sent interest rates south, he says, the city and school system lost millions, while Wall Street got government bailouts.
“We went through a number of years of a really terrible economy; these guys pretty much caused it. They benefited from it, and we bailed them out. So maybe its time for somebody to bail out the school district, and give us some of our money back,” Kenney says.
Kenney also says the hearings would look at what went wrong, and whether firms that the feds later bailed out could now be sued to recover the city’s millions.