MBTA should seek better terms from banks on misguided interest swaps - Editorials - The Boston Globe: The T entered into interest-rate swaps in the early 2000s, when interest rates seemed low and were expected to rise. In these deals, the T issued bonds to banks and agreed to pay them back at a fixed rate. In exchange, banks would pay the T at rates that varied with the market. The swaps turned into bad bets when interest rates dipped to historic lows as a result of the financial collapse. Now the T, like transit agencies across the country, is paying down debt at rates far higher than what’s available on the market, costing the T almost $26 million each year, according to a study from a group called the ReFund Transit Coalition. The T can only refinance if it pays a huge exit fee — a step that other public transit agencies have taken.
... banks profiting from swaps — Deutsche Bank, JPMorgan Chase, Morgan Stanley, and UBS — all benefited from the federal bailout as the nation plunged into recession.
Tuesday, June 26, 2012
at 12:52 AM