"I have 30 years in the business," said Vitale, a former bank executive and former president and CEO of the Chicago Board of Trade. "I'm not a neophyte." -- David VitaleToday's Trib blows the lid off of the Great CPS Interest-Rate-Swap in which the mayor and his hand-picked school board traded the future of the public school system for cash. If this sounds a lot like former Mayor Daley's parking meter deal -- it should.
It was Daley's $1/yr. man David Vitale, who engineered the dirty deals which also had support from a bill run through the state legislature by Sen. Pres. John Cullerton. Cullerton defended the bill, calling it part of "an effort to run government [schools-m.k.] more like a business."
The CEO at the time was none other than Arne Duncan (although for some reason, the Trib report spares him any mention). From 2003 through 2007, the district issued $1 billion worth of high-risk auction-rate securities, nearly all of it paired with complex derivative contracts called interest-rate swaps, in a bid to lower borrowing costs. But lower costs they didn't. Over the life of the deals, the district stands to pay an estimated $100 million more in today's dollars than it would have on traditional fixed-rate bonds.
The banks benefited, of course. Derivative contracts created new profit opportunities, and fees on auction-rate securities were higher than for other types of bonds.
The Tribune reports:
No other school district in the country came close to CPS in relying so heavily on this exotic financial product. In fact, market data show the district issued more auction-rate bonds than most cities, more than the state of California.Even though this latest scandal preceded Rahm Emanuel, the current mayor is still tied to it. It was Rahm who brought Vitale over from turn-around company, AUSL and made him Board President. Vitale is still Rahm's go-to financial guy and the district continues to pay through the nose for his dealings.
Vitale is now president of the Chicago school board. Since Mayor Rahm Emanuel named him to the post in May 2011, he has presided over slashed budgets, teacher layoffs and the closing of more than 40 schools. As the Tribune reported last year in its "Broken Bonds" series, tens of millions of dollars in borrowed money went into schools that are now closed.