NEW YORK, Dec. 21, 2011 /PRNewswire/ -- A new report released by UnitedNY, the Center for Working Families, and the Strong Economy for All Coalition shows that while the bailed-out banks make hundreds of billions of dollars off of interest rate swaps, taxpayers get left holding the bill and government and other public entities, like the MTA, are forced to make layoffs and reduce services. The coalition of labor and community groups called on the MTA to work to renegotiate or push for the cancellation of these deals to help prevent future layoffs and service cuts.

Interest rate swaps – complex financial products engineered by Wall Street that most people likely have never heard of – have turned into a major stream of cash moving directly out of public budgets and into the pockets of the biggest banks. Swaps were sold to government officials as a way to lower the costs of borrowing by, in essence, converting variable interest rates on municipal bonds into fixed interest rates. However, these swap deals have instead grown into a huge liability, draining away money that could otherwise go to maintain essential services, close budget gaps, retain good jobs, and shore up our crumbling infrastructure.

The report found:

• New York State, New York City, and other public entities are today paying over $236 million per year to the big banks on just a few of these swap deals.
• The MTA has already paid out a net $658 million to banks under these swap agreements between January 2000 and August 2011, and is projected to pay an additional net $1.3 billion more before all of their current swap agreements end. The MTA's net swap payments in 2010, if spent on transit instead of payments to banks, could have spared the riding public from deep subway and bus service cuts and cleaning reductions, as well as 1,012 MTA workers at New York City Transit from layoffs and the elimination of 749 positions associated with these cuts, with approximately $40 million to spare.
• The State of New York's 37 swap deals are costing the State a net $70.6 million per year (as of March 31, 2011) in payments to the banks. $15 million of the State's payments to banks were linked to swap deals related to the City University of New York — more than what would be needed to fully fund health insurance for adjunct faculty members. It could also cover the 2011 school year's $300/year tuition increase for 50,000 full-time resident undergrads.

Banks should be held accountable for their part in crashing the economy, not rewarded with what amounts to a second bailout under lucrative swap agreements.

Banks should: (1) Renegotiate or cancel these deals at no cost to taxpayers, and (2) be transparent about the deals that currently exist

Government officials should: (1) Insist that big banks come to the table to renegotiate or cancel these deals, at no cost to taxpayers; (2) require a full accounting of swaps deals, affording the public with much needed transparency about bank dealings; and (3) conduct business with those banks that agree to work cooperatively in cleaning up these deals that currently transfer tax dollars to a small portion of the private sector.

"Swaps deals are yet another example of the tactics used by big banks to take advantage of the taxpayers who bailed them out of their financial crisis," said Camille Rivera of UnitedNY.  "These same taxpayers, many of whom are having trouble making ends meet for themselves and their families, end up footing the bills for these deals, through fare hikes and service cuts.  Enough is enough – people are tired of paying more and getting less. Instead of continuing to take from taxpayers through deals like these, banks should invest in local communities to help put people back to work."

"New York's taxpayers and straphangers are -- once again -- getting the short end of the stick from Wall Street with these interest rate swap deals. It's not right to force more layoffs and more service cuts on the 99 percent to pay for more profits and more big bonuses for the 1 percent.  The MTA has got to push the big banks to find a reasonable solution: renegotiate or just outright cancel these swaps. And we've got to rebuild public entities like the MTA and make them work for the whole public, not just for their advisers and bankers and executives," said Michael Kink, Executive Director of Strong Economy for All. 

View Full Report Here: http://unitedny.org/files/2011/12/Report-on-New-York-Swaps1.pdf 
View Executive Summary Here: http://unitedny.org/2011/12/13/money-for-nothing-new-york-interest-rate-swaps/

SOURCE UnitedNY, Center for Working Families, Strong Economy for All Coalition