For some reason, 2008’s Credit Default Swaps came to mind while reading this article…
I wonder why?
~
When faced with big legal bills or settlements, cities have lots of ways to come up with cash. Some have dedicated funds, some have insurance policies.
Others finance their legal obligations by selling bonds, just as they would to raise money for infrastructure or public parks. And that’s where Wall Street makes bank, with next to no risk.
Big banks compete to underwrite — or act as the middle men — on these “general obligation bonds” because they pay out millions in fees.
Then, they sell the bonds to high-net-worth individuals and hedge funds, which collect interest as high as 7%.
.
These so-called “police brutality bonds,” as they’re colloquially known, “quite literally allow banks and wealthy investors to profit from police violence,” according to a 2018 report from the Action Center on Race and the Economy.
.
The bonds are also backed by the “full faith and credit” of the issuing municipality, which means the city can do just about anything to service that debt — including raising taxes.
Since cities rarely default, the bonds are nearly risk-free for investors. And although taxpayers normally foot the bill for police settlements, the added interest on the bonds can nearly double the costs.
It’s a transfer of wealth from Main Street to Wall Street, and city officials are making it happen with almost no oversight from taxpayers.
✁
And then there are the underwriting fees, or the commissions banks get for selling the bonds on behalf of the city. But the payments aren’t spread out over time like the interest. Banks take their cuts of the proceeds even before the deals are done.
In 2017, Goldman Sachs pocketed $1.8 million as the lead underwriter, or book-runner, on Chicago’s $275 million bond sale. Three years prior, Wells Fargo collected $1.72 million…
I’m with Opie, not real proud of us these days. All my old friends in Cali are hanging on by their fingernails, friends of friends lost everything. Meanwhile Trump says they should be raking the forests. The federally owned forests… < sigh >
“How do you still trust this man …? This is like believing a Nigerian email scammer after he tells you that he’s a Nigerian email scammer.’”— Trevor Noah
Cheapskate0 over 3 years ago
So, Opie won’t be taking her back to Mayberry?
(Someone had to say it)
Wilde Bill over 3 years ago
Yeah, that would make sense.
Darsan54 Premium Member over 3 years ago
We do tend to be very tribal, that is true.
fuzzbucket Premium Member over 3 years ago
All our tribes spend so much time working to antagonize each other that I don’t want us in my neighborhood, either.
Silly Season over 3 years ago
For some reason, 2008’s Credit Default Swaps came to mind while reading this article…
I wonder why?
~
When faced with big legal bills or settlements, cities have lots of ways to come up with cash. Some have dedicated funds, some have insurance policies.
Others finance their legal obligations by selling bonds, just as they would to raise money for infrastructure or public parks. And that’s where Wall Street makes bank, with next to no risk.
Big banks compete to underwrite — or act as the middle men — on these “general obligation bonds” because they pay out millions in fees.
Then, they sell the bonds to high-net-worth individuals and hedge funds, which collect interest as high as 7%.
.
These so-called “police brutality bonds,” as they’re colloquially known, “quite literally allow banks and wealthy investors to profit from police violence,” according to a 2018 report from the Action Center on Race and the Economy.
.
The bonds are also backed by the “full faith and credit” of the issuing municipality, which means the city can do just about anything to service that debt — including raising taxes.
Since cities rarely default, the bonds are nearly risk-free for investors. And although taxpayers normally foot the bill for police settlements, the added interest on the bonds can nearly double the costs.
It’s a transfer of wealth from Main Street to Wall Street, and city officials are making it happen with almost no oversight from taxpayers.
✁
And then there are the underwriting fees, or the commissions banks get for selling the bonds on behalf of the city. But the payments aren’t spread out over time like the interest. Banks take their cuts of the proceeds even before the deals are done.
In 2017, Goldman Sachs pocketed $1.8 million as the lead underwriter, or book-runner, on Chicago’s $275 million bond sale. Three years prior, Wells Fargo collected $1.72 million…
~
https://www.vice.com/en_us/article/akzkze/how-wall-street-profits-from-police-brutality
rossevrymn over 3 years ago
Snorestantisfernuthism
russef over 3 years ago
Now THAT’S intelligence!
dollarduke over 3 years ago
As a lifelong Science Fiction Fan, I’ve always suspected this is how it would work…
Kip W over 3 years ago
OP phone home.
gopher gofer over 3 years ago
smart policy…
William Robbins Premium Member over 3 years ago
I’m with Opie, not real proud of us these days. All my old friends in Cali are hanging on by their fingernails, friends of friends lost everything. Meanwhile Trump says they should be raking the forests. The federally owned forests… < sigh >
“How do you still trust this man …? This is like believing a Nigerian email scammer after he tells you that he’s a Nigerian email scammer.’”— Trevor Noah
RobinHood over 3 years ago
Hey, Mr. Spaceman
Won’t you please take me along?
I won’t do anything wrong
Hey, Mr. Spaceman
Won’t you please take me along for a ride?
bigal666 over 3 years ago
Where can I get a green alien suit?
BeniHanna6 Premium Member over 3 years ago
Does the term ‘humanity’ even apply to humans today?