After the Philadelphia School District and city government lost hundreds of millions of dollars through bond deals known as “interest rate swaps,” City Council is holding hearings.
Councilman Jim Kenney called for the hearings to review how more than $300 million was lost through interest rate swaps that were supposed to protect Philadelphia if interest rates rose. But the city and school district lost money because rates dropped.
Pennsylvania Auditor General Jack Wagner says the highly speculative financial tool should not be used in government.
“Because the district still has three swaps in effect, the ultimate financial impact on the district’s taxpayers remains to be seen,” Wagner said. “The district’s three active swaps, which are tied to $100 million in debt as of last month, had a net negative value of $32 million.”
Kenney says he wants to know why no one has taken legal action against those who advised the district to make these deals.
“I’d hire every big law firm I could find, to go after everybody, including Merrill Lynch and all of them,” Kenney said.
The school district did not have a representative at the hearing.