If you’ve seen my new favorite movie, The Big Short, you’ve heard that banking used to be a boring, old-boys’ enterprise that mostly consisted of lighting up a cigar, making a fixed-interest loan to the neighborhood hardware dealer, and taking a nap.
Over the life of the deals, the last of which will expire in 2033, Illinois will pay about $832 million more.
(I tried to reach Blagojevich’s chief financial officer, John Filan, for this cameo. He didn’t respond, but he’s apparently still around. In the fall of 2014, he was consulting for the Chicago Public Schools, which is struggling with its own swap payments, and last week the Sun-Times reported that his wife, Sally Csontos, was recently hired to be CPS’s executive director of change management at a salary of $160,000 a year.)
The theory was that, in the end, the swap would be a wash. The state would get upside interest-rate protection, and the only real money the bank would make would be the fee it charged for entering into the deal.
Now, stalled out over a multibillion dollar budget gap, Illinois is cutting or withholding funding for education and social services, but is still making those swap payments to big banks like Wells Fargo and JP Morgan Chase.
So there’s a chance our pro-business, venture-capitalist governor will take on those big banks and make them do the right thing any day now.
