Swimming with the Sharks

Written on February 24th, 2015 in politics Comments Off

… Goldman Sachs, School Districts, and Capital Appreciation Bonds – Published on Dissident Voice, by Ellen Hodgson Brown, Feb 21, 2015.

… Remember when Goldman Sachs, dubbed by Matt Taibbi “The Vampire Squid”, sold derivatives to Greece so the government could conceal its debt, then bet against that debt, driving it up? It seems that the ubiquitous investment bank has also put the squeeze on California and its school districts. Not that Goldman was alone in this; but the unscrupulous practices of the bank once called the undisputed king of the municipal bond business epitomize the culture of greed that has ensnared students and future generations in unrepayable debt.  

In 2008, after collecting millions of dollars in fees to help California sell its bonds, Goldman urged its bigger clients to place investment bets against those bonds, in order to profit from a financial crisis that was sparked in the first place by irresponsible Wall Street speculation … //

… Green Light to Exploit: … //

… Debt for the Next Generation: … //

Among the hundreds of California school districts signing up for CABs were fifteen in Orange County. The Anaheim-based Savanna School District took on the costliest of these bonds, issuing $239,721 in CABs in 2009 for which it will have to repay $3.6 million by the final maturity date in 2034. That works out to $15 for every $1 borrowed.

Santa Ana Unified issued $34.8 million in CABs in 2011. It will have to repay $305.5 million by the maturity date in 2047, or $9.76 for every dollar borrowed.

Placentia-Yorba Linda Unified issued $22.1 million in capital appreciation bonds in 2011. It will have to repay $281 million by the maturity date in 2049, or $12.73 for every dollar borrowed.

In 2013, California finally passed a law limiting debt service on CABs to four times principal, and limiting their maturity to a maximum of 25 years. But the bill is not retroactive. In several decades, the 400 cities that have been drawn into these shark-infested waters could be facing municipal bankruptcy – for capital “improvements” that will by then be obsolete and need to be replaced.

Then-State Treasurer Bill Lockyer called the bonds “debt for the next generation.” But some economists argue that it is a transfer of wealth, not between generations, but between classes – from the poor to the rich. Capital investments were once funded with property taxes, particularly those paid by wealthy homeowners and corporations. But California’s property tax receipts were slashed by Proposition 13 and the housing crisis, forcing school costs to be borne by middle-class households and the students themselves.

The same kind of funding shift has occurred in college education nationally. Tuition at public universities and colleges was at one time free. But in successive economic downturns, states have made up for shortfalls in educational budgets by raising tuition. By 2012, tuition was covering 44% of the operating expenses of public higher education. According to a March 2014 report by Demos, 7 out of 10 college seniors now borrow, and their average debt on graduation is over $29,000. The result nationally is a student debt that has grown to $1.5 trillion.

… The State that Escaped: North Dakota: … //

… (full text inkl. hyper-links).

(Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her 200+ blog articles are at EllenBrown.com. Read other articles by Ellen, or visit Ellen’s website).

Economy and Debt Related Links:

The Grexit Dilemma: What Would Happen if Greece Leaves the Euro Zone? on Spiegel Online International, by SPIEGEL Staff, Feb 20, 2015 (Photo Gallery): Banks across Europe, including the European Central Bank, are preparing for the possibility of Greece leaving the euro zone. With Athens and Brussels still at odds, such an eventuality seems more realistic than ever. But how disruptive would a Grexit really be …;

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Other Links:

No credible plot: DHS distances itself from chief’s ‘mall terror threat’ warnings, on Russia Today RT, Feb 23, 2015: The Department of Homeland Security has denied it is aware of any credible terrorist plots against shopping centers on US soil after their chief advised shoppers, particularly in the Mall of America, to be careful following threats from Somali extremists – “We are not aware of any specific, credible plot against the Mall of America or any other domestic commercial shopping center” …;

Snowden documentary CitizenFour grabs Oscar, on Russia Today RT, Feb 23, 2015;

The logic of the imperial security state, on Intrepid Report, by Luciana Bohne, Feb 23, 2015;

Retailers Are Warned Over Herbal Supplements, these cease-and-desist letters were sent to GNC, on NYT, Feb 3, 2015. Targets: Walgreens and Walmart by the New York State attorney general, who demanded that the retailers explain how they verify the ingredients in their herbal supplements. (Related: New York Attorney General Targets Supplements at Major Retailers, on NYT/Well/blog, by ANAHAD O’CONNOR, Feb 3, 2015 – Reépris den français ans le newsletter de Santé Nature Innovation);

Terrorism exported to Middle East from Europe – Assad, on Russia Today RT, Dec 4, 2014;

Douze preuves de l’inexistence de Dieu, dans Libertaire/Page perso, par Sébastien Faure, non-daté;

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