"As a managing director at JPMorgan Chase, Mr. LeCroy persuaded the county to convert its debt from fixed interest rates to adjustable rates. He also recommended that the county use interest-rate swaps that he said would protect it if interest rates rose. "

“Ya know what this county needs, sir? A monorail!”

Look, fixed vs. floating is a pretty simple concept. Now, I know what JPM would have showed them, as I saw these pitches numerous times from 2002-2005 or so.

A very simple presentation showing that, over time, going variable is the right thing to do. You almost always end up ahead by going variable.

Sometimes you don’t, but, for various reasons X,Y, and Z, we, JP Morgan, don’t think that there is much of a threat of significantly rising interest rates.

That is all the pitch would have been. It’s not a difficult concept. Jefferson County took a bet, and lost. It’s their fault, not JPM’s.

"The money powers prey upon the nation in times of peace and conspire
against it in times of adversity.  It is more despotic than a monarchy, more
insolent than autocracy and more selfish than a bureaucracy.  It denounces,
as public enemies, all who question its methods or throw light upon its
crimes.  I have two great enemies, the Southern Army in front of me and the
bankers in the rear.  Of the two, the one at the rear is my greatest foe."

-- President Abraham Lincoln, letter to William Elkins, Nov 21, 1864

 

>>Jefferson County took a bet, and lost.

Based upon the advise of Mr. LeCroy.

Not a very honorable man, given his prison record.

The problem here really goes like this:

Most politicians are really pretty simple-minded people. They’re not the sharpest tools in the shed.

And the closer you get to the local level, the more you find people who have NO idea of the intricate nature of modern finance.

So you get what we have here: A bunch of people who are familiar with modern financial products pitching high-risk products to people who still think that the banking system works the way it did in the 1930’s. The local pols see the immediate pot of money they get by selling a swap (or dabbling in some other instrument) and that’s where their attention span ends. They literally cannot foresee the net:net effects of “what happens if...?” They have the attention span of less than one term in office and this is where things bite them.

As such, political sovereigns should not be allowed to “invest” in such instruments - at all. The whole issue should simply be removed from the local level and legislated away.

As such, political sovereigns should not be allowed to “invest” in such instruments - at all. The whole issue should simply be removed from the local level and legislated away.

fair enough, perhaps. But JPM shouldn't be sued for selling the same product they sell to every corporation out there.

Yea, that’s true. I completely agree with you.

But we’re now a lawsuit-happy society. There’s nothing that can return us to the days of common sense prevailing before someone picks up a phone and dials a lawyer. Those days seem long gone.

To quote Ron White: “There’s no fixin’ stupid.”

And in politics in the US now, at all levels, we seem to have an “abundance of stupid.”

BINGO!!!!

Shades of Joplin, Missouri.

monorail

Is that what you call one of those fence rails you carry the tarred and feathered bankers, consultants, attorneys and public officials out of town on?

But JPM shouldn't be sued for selling the same product they sell to every corporation out there.

They were just trying to help out a struggling county raise some funds for a county project. Right!

They were just trying to help out a struggling county raise some funds for a county project. Right!

Huh? No, they were trying to make money. So what? A customer takes a bet, and then sues if they lose on the bet? Why should JPM be held responsible for that?

No, it's what a con-man would have (and probably could have, judging by the current situation there) sold to Jefferson County before the bankers came along to swindle them out of whatever they might have had left after the monrail deal was done.

I'm guessing Jefferson County is run be dimmocrats, but I could be wrong. Anyway, they probably could have been conned into buying something like this with the taxpayer's money. Hope this isn't a copyright infringment:

Well, It Put Ogdenville, North Haverbrook, and Brockway On The Map.

Is Larry Langford a crook or a schmuck? The JPMC guy and Blount have raked in millions in commissions, and the SEC is alleging that Langford got $54,000 total in the deal.

I vote for schmuck.

What the article doesn't say is now he's Mayor of Birmingham. It will be interesting to see if the city manages to escape bankruptcy under his stellar leadership.

Based upon the advise of Mr. LeCroy.

They based such a huge decision on the advice of one man? A man who could get a large fee from their business? They're dumber than I initially suspected.

>>I vote for schmuck.

I vote for Judas Goat. Langford and his ilk have betrayed the fiduciary trust of their constituents and led them straight into the jaws of a financial meat grinder.

>>They’re dumber than I initially suspected.

Is the exploitation of stupidity honorable?

I'm sorry, where did I say anyone was honorable in this mess?

>>I’m sorry, where did I say anyone
>>was honorable in this mess?

Didn’t say you had. I was asking a question.

By your response then, I take it you agree that deliberately taking advantage of an inequity in financial knowledge or education is not honorable behavior; Is that correct?

...and Larry P. Langford, the local official who signed off on the deals.



Then I have litte sympathy for the people of Jefferson County, who put the corrupt and shiftless Langford into power. This con artist has been lining his and his crony's coffers with taxpayer dollars for almost 40 years. The idiot populace of Birmingham, who vote based on race rather than merit, deserve what they get.

The only ones I do feel somewhat sorry for would be the outer edges of JeffCo, who don't vote for this twit. However, they're the ones who ran away from the city in the 60's and took their votes with them, and now the fruits of that exodus are coming home to roost.

Those who migrated to Shelby County are no doubt laughing.

Well, I guess I really don’t know anything about this LeCroy guy.. do you have a good background link?

By your response then, I take it you agree that deliberately taking advantage of an inequity in financial knowledge or education is not honorable behavior;

Did they borrow money no-bid? Then they're stupid. Did they place a $5 billion bet on interest rates with no outside advice. Then they're stupid. Did they think they could plug a budget hole by gambling instead of cutting spending? Then they're stupid and maybe criminal.

Did they take a shot thinking they could sue their way out of the debt if they lost? Maybe they're just scumbags.

Is that correct?

Obviously we need a law against anything you think is dishonorable.

>>Well, I guess I really don’t know anything about
>>this LeCroy guy.

http://www.google.com/search?hl=en&q=LeCroy+JP+Morgan&btnG=Google+Search

>>Obviously we need a law

Why, so the legal spiders can cast a wider web?

>>against anything you think is dishonorable.

Interesting how you presume an association between legality and honor. How’s O.J. doing these days?

Do you think it’s honorable behavior to deliberately take advantage of an inequity in knowledge or education? Yes or No.

they were trying to make money. So what?

First, I keep forgetting that I have to put in sarcasm warnings.

Second, it isn't just a bet. It is a government contract. There are two scoundrels in the deal, but in addition, the "beneficiary" is the taxpaying public, and it will be interesting to see how this ends up working out for JPM.

Do you think it’s honorable behavior to deliberately take advantage of an inequity in knowledge or education? Yes or No.

This guy represents over 200,000 people and a multi-billion dollar economy. He should know what he's doing.

If he doesn't, then he shouldn't have been elected.

"What the article doesn't say is now he's Mayor of Birmingham. It will be interesting to see if the city manages to escape bankruptcy under his stellar leadership."

The whole reason to put Langford into the Mayor's office is to break the city of Birmingham such that thousands of useless crony-jobs are terminated in bankruptcy court.

There is no politically acceptable way for a dying city to fire thousands of employees, save for bankruptcy.

Birmingham has hundreds of neighborhood associations that vote down every new corporate development...which is why Mercedes, Honda, Toyota, Kia/Hyundai and others have all located near, but outside, the city limits.

The city will continue to hemorage population and jobs until that powerhold is broken.

Langford just speeds up that process, as the city has to go bankrupt, first.

"This guy represents over 200,000 people and a multi-billion dollar economy. He should know what he's doing. If he doesn't, then he shouldn't have been elected."

Langford is achieving his purpose on schedule...he bankrupts governments with ease (e.g. Fairfield, Bessemer, Visionland, Jefferson County, Birmingham, etc.).

How else can you fire so many lifelong city bureaucrats?!

Most politicians are really pretty simple-minded people. They’re not the sharpest tools in the shed.

And the closer you get to the local level, the more you find people who have NO idea of the intricate nature of modern finance.

But many of them do understand how to exploit their position and collect big money.

The corruption in rural Alabama counties is remarkable. Virtually everything is for sale -- dog track licenses, waste disposal areas, manufacturing sites, etc.

One school district built an elaborate new school...which was almost immediately labelled unusable due to construction flaws. The school board got rich, though.

Another town couldn't pay their light bill...because the mayor had spent the money on a new driveway for his palatial home.

I can't say that Jefferson County suffered from dumb politicians or corrupt politicians. My best guess, though, would be "both".

"And the closer you get to the local level, the more you find people who have NO idea of the intricate nature of modern finance."

Oh please. I just watched Senator Dick Durbin ask Exxon why it was charging old women and cripples so much for gasoline.

Durbin, Patty Murray, and Barbara Boxer couldn't understand why round pegs won't go into the square holes of children's toys.

Interesting how you presume an association between legality and honor.

I thought you were doing that? If the sleazy salesman did anything illegal, throw him in jail. Ditto for the elected officials.

Do you think it’s honorable behavior to deliberately take advantage of an inequity in knowledge or education?

How do you define "deliberately take advantage"?

I used to play tennis with Larry ... sad to see he was duped in this way, because he is basically an honest man with a good heart.

You left out that he’s a democrat.

I just figured out what happened to these clowns. Instead of locking in their rate, they went for one of those new deals where every month or so they have another auction to determine the rate they pay. This worked for a while and they probably saved 1/4 of a percentage point on their debt.

When liquidity dried up, no one wanted to buy their paper, at any rate, so that 1/4 point savings was lost in about a week. Luckily, they hedged against a general rise in rates. Unfortunately, rates fell, except on this type of paper.

They owe more on their debt and now their hedge is losing money as the Fed cuts the FF rate.

A broker I used to know said, "a spread ain't nothin' but a stick with shit on both ends". They got the mother of all shitty sticks.

I’m planning a house in Jemison ... caught between the rock (Montgomery, capital and socialist haven) and the hard place (Birmingham, the biggest ‘city’ in Alabama and thoroughly lost to liberalism). Larry is a typical black democrat politician steeped in entitlements, as the Obama candidacy is showing us ... isn’t it Barry who stamped all opposed to him as ‘typical’?

Yes. Local hillbillies were talked into auction rate bond financing...by out-of-town players. Birmingham’s own in-city banks dissed the deal.

You can still hear Wallace Malone’s (old SouthTrust bank) scream of “HELL NO!” echoing from 1992 if you crack a window while driving through Bham.

Believe it or not I used to sell auction rate preferreds. That market has been marked by bad press from the get go. There is nothing wrong with the concept even as it was carried over to long term muni financing.

This Alabama fiasco has been well covered by Bloomberg. It is a typical small time politician cozying up to the slickies from NY who promise a pot of gold. There is absolutely no excuse for Jefferson County officials to believe anything a NY banker tells them unless they know it to be true or can independently verify it.

JPM has a sales force that goes out into flyover country and sells financial deals to CEO Joe. Nothting wrong with that until you find out they were peddling (and you were buying) stinky BS (recall Enron) and calling it attar.

Let the buyer beware. Or, if you're a fiduciary in any capacity, don't believe what you hear from a New York banker. LOL.

Freedom is:
Putting a bullet on the railroad tracks, dowsing the bullet with lighter fluid and lighting the fluid to see the bullet explode. Education is not a commodity that can be ignored.

There is nothing wrong with the concept even as it was carried over to long term muni financing.

I agree. Some on this thread would claim that selling these securities is immoral. I'll bet they didn't use that word when these securities were saving money for the client.

Some on this thread would claim that selling these securities is immoral

When anything monetary goes bust, those who were making money off of it will be the first to point fingers at those who created and sold it. It's NEVER the fault of the investors who should have been prudent in the first place. This is especially true for people who are in charge of other peoples' money. Orange County, California comes to mind.

The funny thing about that fiasco is that NGO's like FNMA and FHLB were the issuers who created the toxic waste but they didn't get any blame. Only the peddlers got sued. And the world turns.

I think the downfall was when closed end funds realized they could juice their returns by issuing auction rate preferreds and investing long. Borrow short/ lend long. After hundreds of years of experience it still catches some really smart people - and zeroes them out.

Is the exploitation of stupidity honorable?

It's moot, as honor is seldom valued, carries a disincentive in most cases, and is even celebrated by liberals..  In the decaying American, it has become the cultural norm in all but the most singular form.  You neglect to realize this at your own peril. 

This, in part, explains why these conflicts are often decided in the courts, the new social arbitrers of morality (see California Homosexual Marriage (sic)).  JPM and the plaintiff actually prefer to have it in the courts: Both parties would not favor well against a educated, moral citizenry nor omnipotent God.  This was the judge and jury of yesteryear America, and unfortunately, liberals have been quite effective in snuffing them both to only a volatile remnant.

>> This guy represents over 200,000 people and
>>a multi-billion dollar economy.
>>He should know what he’s doing.

>>If he doesn’t, then he shouldn’t have been elected.

Misrepresentation seems to be more the norm these days. From the Mayor of Birmingham on up to the POTUS.

I’d like to think, for instance, that GW was smarter than to get duped by “Godfather of Subprime”, Roland Arnal - whom he appointed to the Ambassadorship to the Netherlands; but he wasn’t.

>>I thought you were doing that?

You thought wrong. Creating new laws will not fill the growing chasm between what is honorable and what is legal.

>>How do you define “deliberately take advantage”?

The word I have in mind is “Swindler”.

Those clowns in the Senate aren’t stupid about only modern finance.

They’re simply more stupid than a truckload of stump holes. About everything.

There are some honorable local pols, who do a good job on the whole, but you get them onto the subject of bonds, financing, bond ladders as investment(s) for budget surpluses, etc — and the have that “deer in the headlights of a Peterbilt” look about them.

The word I have in mind is “Swindler”.

So selling them a product that saves them money is okay?

"Out-of-town players also included Wall Street types such as Charles LeCroy, former managing director of the southeast regional office of J. P. Morgan and Anthony Snell, a former J. P. Morgan vice president. LeCroy and Snell hailed from Florida and Georgia respectively. Both pled guilty to billing J. P. Morgan for $50,000 worth of non existent legal work by Ronald White. In exchange for his influence in obtaining city business for J. P. Morgan. Business that was also beneficial to LeCroy and Snell."