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  #21  
Old 10-19-2009, 09:16 PM
Irish Blues
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This is what I don't get. The man is widely known to be corrupt, yet the people have no will to remove him from office.
Knowing people who live down there, there's a ton of them who'd follow Langford right off a bridge.

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Also, where does a bankrupt city get money to build a $550,000,000 stadium???
To be more accurate about the situation [we have a thread in the Non-Actuarial forum, though it hasn't been updated for several weeks because there's really not much new going on], it's Jefferson County that's in trouble - and more specifically, it's the county's sewer district that's the source. However, the problems of the sewer district are the county's problems - and the county commissioners are so inept, they barely agree on much ... and so the county drifts aimlessly and the current situation just becomes more impossible to solve [and Chapter 9 becomes more and more inevitable].

Where does $550M come from?
http://www.birminghamdome.com/index....lan-announced/

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ďThe plan presented to the board includes having $22 million from the city and $14 million in taxes and fees from the BJCC [Birmingham-Jefferson Convention Complex] to pay for the multi-purpose facility by 2010.

Bond payments would be required for about 30 years.
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  #22  
Old 10-23-2009, 07:51 AM
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What the hell, this is just as stupid. Putting it in here because I feel like it.

http://mobile.bloomberg.com/apps/new...d=aufmSRtDn0gg

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New Jersey Pays Goldman Sachs for Swaps on Nonexistent Bonds
By Dunstan McNichol

Oct. 23 (Bloomberg) -- New Jersey taxpayers are sending almost $1 million a month to a partnership run by Goldman Sachs Group Inc. for protection against rising interest costs on bonds that the state redeemed more than a year ago.

The most-densely populated U.S. state is making the payments under an agreement made during the administration of former Governor James E. McGreevey in 2003, when New Jersey’s Transportation Trust Fund Authority sold $345 million in auction-rate bonds whose yields fluctuated with short-term interest costs. The agency finances road and rail projects.

“This vividly shows the risk of entering into interest- rate swap agreements,” said Christopher Taylor , former executive director of the Municipal Securities Rulemaking Board in Alexandria, Virginia. “The world’s got to see what stupidity even the sophisticated investors like the transportation fund can get into.”

While New Jersey replaced the debt with fixed-rate securities in 2008 after the $330 billion auction-rate bond market froze, the swap, in which two parties typically exchange fixed payments for ones based on floating interest rates, isn’t scheduled to expire until 2019.
Didn't I create a "dumbass derivatives moves" thread? I'm lazy.
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  #23  
Old 10-23-2009, 08:28 AM
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I feel dumb, but I think I'm missing something. If it is a swap, they have to be receiving something in return, or does it mean just the rate at which they entered the swap has put them out of the money by $1m a month?

I guess now that I think about it more, only one party makes a payment because of netting. I think this is more of a case of "hindsight is 20/20" rather than idiotic derivative exposure. If rates had went up, then GS would be making payments to them, thus reducing the weighted average fixed rate of their new bonds. As it is now it just makes their weighted average fixed rate higher. If they had just issued fixed rate bonds back then instead of swap + auction rate the current amount they're paying would be similar... except it would all be going to bondholders instead of a smaller amount to bondholders and the rest to GS.

Am I wrong?

Last edited by Vomik; 10-23-2009 at 08:38 AM..
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  #24  
Old 10-23-2009, 09:52 AM
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Except that now they have a straight speculative position. Before the swap was hedging the floating bonds. With the floating bonds gone, there is no risk management component.
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  #25  
Old 10-23-2009, 10:17 AM
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I think this is more of a case of "hindsight is 20/20" rather than idiotic derivative exposure. If rates had went up, then GS would be making payments to them, thus reducing the weighted average fixed rate of their new bonds.
I think it's more of a case of "why is the government gambling with taxpayers' money".
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  #26  
Old 10-23-2009, 10:48 AM
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Except that now they have a straight speculative position. Before the swap was hedging the floating bonds. With the floating bonds gone, there is no risk management component.
That's a good point, I suppose now they're receiving a floating payment for no reason. I suppose a cancelable swap would have been the correct move. (Or just issue fixed the first time.)
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  #27  
Old 10-26-2009, 09:12 AM
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More public money p1ssed away info [yes, Harvard wasn't public, but whatever. Similar mistakes]

http://mobile.bloomberg.com/apps/new...d=aBarSkIcch2k

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Oct. 26 (Bloomberg) -- Salvatore Calvanese, the treasurer of Springfield, Massachusetts , for four years, had a ready defense for why he risked $14 million of taxpayer money on collateralized-debt obligations laden with subprime mortgages in 2007.

He didn’t know what he was buying, he says, and trusted the financial professionals who sold them and told him they were safe.

“I thought they were money markets that were just paying more,” Calvanese said in an interview. “Nobody ever used the term ‘CDO,’ and I am not sure I would have known what that was anyway.”

Such financial mistakes, often enabled by public officials’ lack of disclosure and accountability for almost 90 percent of government financings in the $2.8 trillion municipal bond market, are costing U.S. taxpayers as much as $6 billion a year, according to data compiled by Bloomberg in more than a dozen states.

The money lost to taxpayers -- when the worst recession since the Great Depression is forcing local governments to cut university funding, delay paying bills and raise taxes -- is enough to buy health care for everybody in Minneapolis; Orlando, Florida; and Grand Rapids, Michigan, according to figures from the U.S. Census Bureau and the U.S. Department of Health and Human Services.

Florida county commissioners approved no-bid deals with their favorite banks in an arrangement that led to criminal convictions. Pennsylvania school board members lost $4 million on an interest-rate swap agreement they didn’t understand in the unregulated $300 billion market for municipal derivatives.
Lots more at the link.
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  #28  
Old 10-26-2009, 10:10 AM
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He didnít know what he was buying, he says
The idiot defense. Always blame someone else for your incompetance.
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  #29  
Old 10-26-2009, 12:04 PM
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Quote:
New Jersey Pays Goldman Sachs for Swaps on Nonexistent Bonds
By Dunstan McNichol

Oct. 23 (Bloomberg) -- New Jersey taxpayers are sending almost $1 million a month to a partnership run by Goldman Sachs Group Inc. for protection against rising interest costs on bonds that the state redeemed more than a year ago.

The most-densely populated U.S. state is making the payments under an agreement made during the administration of former Governor James E. McGreevey in 2003...
I see what they did there...
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  #30  
Old 10-26-2009, 12:50 PM
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It's so funny to be learning about Derivatives for exam FM, and at the same time see the costly mistakes that were made. Well, more sad than funny, I suppose.
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REPENT
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You sound way too excited about studying for 7.

A bit of studying will fix that, though.
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Nope. 7 is the must pass of all must passes next spring. Can leave absolutely nothing to chance. Study schedule starts on November 15th. Is it nuts? Probably. Will I pass? Definitely. Will it be worth it? Of course.
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A bit of an early start for a second sitting, but this exam is a must pass, and there's no such thing as too much studying for a must pass
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