This is where high finance meets the asphalt: Small towns that bought interest rate swaps. Lots of little cities bought in, essentially betting that interest rates would stay low or move in their favor. Like a lot of homeowners who plunged into risky mortgages unaware of the future, all was well for a while. Then interest rates soared. As did the interest payments that small towns were liable for.

The New York Times takes an interesting look at Morgan Keegan and their marketing efforts, which seemed to be very successful in building small-town sales. If you can act as advisor and banker and confidant to town officials, you can have your way. These conflicts may spark a regulatory response. That would be way too late for Lewsiburg , TN.

For more:
- here's the article

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