Thank you, Council President Clarke and members of the Council. I'm here to speak on Bill 130232, which is a resolution to exclude any further City involvement with credit default swaps. Now, that is a phrase that practically no one understands except the people that created them. I'll try to make the explanation quick and then cut to the chase of why this particular bill should be discussed further, because it will cause the City to lose $240 million.
Credit default swaps were created by Wall Street whiz kids from Wharton to basically entice administrations and cities to use a very complicated method of supposedly creating low interest ways to finance major projects. Several cities have been done in badly by using these swaps, the worst of which was Montgomery, Alabama.
The way I describe these swaps is this: In street language, this is like placing a couple hundred million dollars of taxpayer money into a trifecta at the track, but even if you win the trifecta, then the money is gambled again on three-card monte, which the deck is shuffled by a politician.
This city is involved in some swaps. The amount involved, if the City tries to walk away from it, will be a penalty of $240 million. Now, two individuals were sentenced to jail in this city for trying to persuade this city to use more of these swaps a few years back. Those of you who have been around a while will remember LeCroy and Snell from J.P. Morgan, the very same bank that enticed Montgomery, Alabama and Philadelphia to get involved in these.
What I'm suggesting is this: J.P. Morgan has forgiven, forgiven Montgomery, Alabama of the $600 million penalty because it didn't want any more bad press from the very, very sick deal that took place down there. We will lose 240 million if we don't take the same stand as Montgomery. That penalty should not be paid. There's plenty of places we could spend $240 million. And the very fact that we're involved in this has not been properly discussed. I suggest that Council hold an additional hearing. I'll be glad to testify to more detail. This kind of situation reflects badly on the whole city and it's a waste of our taxpayers' money.