Large financial institutions, including many that received financial bailouts in the wake of the financial crisis, are making hundreds of millions of dollars off interest rate swaps negotiated with the City and School District of Philadelphia.
That's the key finding in a new report the Pennsylvania Budget and Policy Center out today. We found that swap deals negotiated with banks such as Wells Fargo, Morgan Stanley and Goldman Sachs have cost the city and school district $331 million in net interest payments and cancellation fees. If interest rates continue to remain low, still-active swaps could cost the city another $240 million in future net interest payments.
WHYY's NewsWorks was there and has posted this brief video clip.
Our report recommends that banks refund a portion of the cancellation fees they received for terminating bad deals and renegotiate those deals which are currently active.
Financial institutions have returned to profitability after the financial crisis, yet some Philadelphia schools cannot afford to keep nurses on staff. Now the banks have an opportunity to step up and help prevent more damaging cuts to schools and public safety, just as taxpayers helped the banks avoid total collapse just a few years ago.