Chicago - A message from the station manager

The [Friday] Papers

By Steve Rhodes

“Mayor Rahm Emanuel this week distanced himself from the risky derivatives that are draining funds from the city’s school system, declaring: ‘Under my tenure, there have been no swaps,'” the Tribune reports.
“But records show the city of Chicago has entered into at least four interest-rate swaps under the Emanuel administration.”
Rahm is a liar. That’s been shown over and over.
For example:


* Rahm Caught Lying About Speed Cameras.
* The Mayor, The Lobbyist And The Dead 6-Year-Old Girl.
* Electing Blago.
* Intent To Return.
* Schools Et Al.
“The Tribune series ‘Borrowing Trouble’ this month found that CPS’ decision to issue $1 billion in auction-rate debt paired with interest-rate swaps will likely cost $100 million more than what the school district would have paid for traditional fixed-rate debt. One draw of those risky deals was the hefty upfront payments that accompanied some swaps.

The Tribune analysis sparked questions from reporters after the City Council meeting Wednesday, and Emanuel was quick to point out that his administration has canceled derivatives the city entered under Mayor Richard M. Daley.
“Under my tenure, there have been no swaps, and we actually terminated nearly about a billion dollars in value of swaps,” he said. “So I’ve been clear about righting the ship going forward.”
Records show that the four swaps entered by the Emanuel administration are linked to existing debt – floating-rate bonds issued in 2003, 2005 and 2007, under Daley. The records obtained by the Tribune show new contracts with new banks, layered on top of existing swaps, in effect creating double swaps on the old debt.

Rahm has doubled-down on debt.

When the Tribune contacted City Hall on Thursday, the mayor’s office described what the Emanuel administration has done as modifications of existing swap deals.
The four swaps entered in December 2011 and February 2012 under Emanuel “are not new swaps,” the mayor’s office said in a statement. “They are modifications to the original underlying swaps, all of which were inherited by this administration.” A spokeswoman for the mayor’s office said the Tribune is “parsing words” by reporting that the Emanuel administration has entered into new swaps.

Rahm made his bones parsing words and pushing phrases and using language as a cudgel. He knows what he said.

A letter the city provided to the Tribune in September offers a nuanced assessment of the Emanuel administration’s record. That month, the city’s chief financial officer wrote to union representatives, who have been critical of city and school swaps, that the city has not entered swaps on “additional debt.”

Rahm is the parser here; what he’s trying to imply is obvious but at odds with the record. Has he embarked on “new” swaps? You could argue No if you equate “new” to mean “from scratch.” Has he made “new” swap agreements? Yes. On top of the old. Which makes them new.

A document showing that the Emanuel administration entered into the four swaps is a listing of the city’s swap deals, titled “City of Chicago Swap Portfolio,” from December 2012. The document was provided to the Tribune months ago in response to a public records request. The city also provided the signed agreement with PNC Bank for one of the February 2012 deals.
Three of the four new swaps increase the unpredictability of the city’s interest payments, experts said. One expert called the new derivatives “speculative.”
“Basically what they wound up doing is speculating on interest rates,” said Matt Fabian, a managing partner at Concord, Mass.-based Municipal Market Advisors. “It might work out well.”

Or not.

The Emanuel administration layered new swap contracts with different banks on top of the existing swaps, records show. Under the new swaps, the city agreed to pay a second set of banks a floating rate – the same floating rate the city is receiving from the first set of banks – and receive a different floating rate.
But in three of the four cases, the Emanuel administration was trading a more predictable arrangement for a less predictable one, Fabian said.

So Rahm has not only modified bad swaps, he’s made them worse. Like the parking meter deal.
“Before (the swaps) there’s very little basis risk if any,” the head of a debt management firm told the Trib. “After, there’s definitely basis risk.”
Don’t Hassle The Hoff
“The nation’s largest organization of psychologists will conduct an independent review into whether it colluded with or supported the government’s use of torture in the interrogation of prisoners during the Bush administration,” the New York Times reports.
“The American Psychological Association said in a statement released late Wednesday that its board had named David H. Hoffman, a Chicago lawyer, to conduct the review.”
That reminds me: Whatever happened to the infrastructure trust?
American Colonial Hangover, Grandma Gatewood & Chris Chelios
In Local Book Notes.
Beachwood Photo Booth: Smokers’ Mast
Set to sail.
Coming Soon: Bad Yung Club Chicago
Um, okay.
The College Football Report: Steel Panther vs. Judas Priest
From Moscow to the San Jose Civic Center.
The Blue & Orange Kool-Aid Report: Home On The Rage
We’re getting dangerously close to the time of year when mascot Barry The Bear retires to sleep in his cave beneath the parking lot.
The Week In Chicago Rock
In pre-production!
The Beachwood Radio Sports Hour: Paging Professor Trestman.
The Bartman Bears. Plus: Derrick Rose Is Not A Fully Formed Human; The Blackhawks In The Cover 2; and Outlawing Sports Gambling Is Un-American, And We’re Not Going To Sit Here And Listen To You Badmouth The United States Of America.
The Beachwood Radio Hour
Coming Saturday!
–
BeachBook
* The Oasis Has Re-Opened.
* Calling BS On Michelin’s Chicago Bib Gourmands.
* Trestman Adopts Baby To Save Relationship With Bears.
* Weeping Over Our New York Times.
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TweetWood
A sampling.


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The Beachwood Tip Line: Riff almightily.

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Posted on November 14, 2014