Wall St. investors make a killing at CPS

The Chicago public school system needed money—fast. Never letting a good crisis go to waste, Wall St. investors stepped in to save the day -- and make their day.

According to a report in the Wall Street Journal, J.P. Morgan Chase & Co. and Chicago-based Nuveen Asset Management have made realized and paper profits exceeding $110 million on purchases this year of $763 million in Chicago Public Schools bonds. The school system has said it needed the money to replenish its dwindling coffers before the new school year and to build and repair facilities.

The terms of the bond sales highlight the choices the school district faces after years of pension shortfalls and relying heavily on borrowing. The 397,000-student school district struggled to sell municipal bonds in February until Nuveen bought about one-third, and the district decided in July to borrow directly from J.P. Morgan for fear that investors might balk again, a spokeswoman for the Chicago Board of Education said.

J.P. Morgan, the country’s largest bank by assets, made a 9.5% profit on $150 million in bonds it bought in July and sold in September, or 82% annualized. Nuveen, an investment firm managing $160 billion, has bought $613 million in bonds since February for a total return, including price gains and interest payments, of about 25%. That is almost 50% on an annualized basis, an especially large gain at a time of near-zero interest rates.

The school system’s bonds are a favorite for John Miller, Nuveen’s co-head of fixed income, who said the firm bought when the market feared a default, a concern he called overblown.

“At the end of day, this school system is critically important to Chicago—to the whole country really,” he said.

QUOTABLES FROM THE OWNERSHIP SOCIETY

Kershner

Chris Kershner, vice president of public policy and economic development for the Dayton Area Chamber of Commerce

“The business community is the consumer of the educational product. Students are the educational product. They are going through the education system so that they can be an attractive product for business to consume and hire as a workforce in the future.” -- Valerie Strauss in WaPo

Former CPS Liar-in-Chief Becky Carroll now heads up Rahm Emanuel's Super PAC

“This questionnaire will allow us to better understand where aldermanic candidates stand and help us to both plan our strategies well in advance of the election and be more nimble as races tighten up. We want to be well ahead of the curve so, as dynamics change ward by ward, we can be more flexible in directing our resources. That’s why we’re starting so early.” -- Sun-Times

JP Morgan’s “point person” in Detroit, Aaron Seybert  

“The working theory at up to the executive suite, is that spending $100 million in America’s most famously bankrupt city is a good investment. Good for Detroit, yes, but also good for JPMorgan. Best case, good for America.” -- NPQ

Frackers backing Rauner

Nelson Wood, a Mount Vernon-based oil producer who co-hosted the fundraiser, said his colleagues are tired of being idle.

“We just think Bruce Rauner will be the better choice. There’s a lot of consternation out there,” Wood said Wednesday. “The governor should have gotten this going a year ago." -- Capitol Fax

J.P. Morgan: The Portuguese connection

Marching against austerity

I just got back from Portugal where austerity imposed by the IMF and other international creditors is crashing peoples' standard of living and destroying public space, including public education. As usual, the alternative to public space and public decision making is privatization and Portugal is no exception.

Guess who's pushing privatization and re-engineering Portuguese society? It's J.P. Morgan, the same investment bankers and hedge-funders who helped crash the economy here.

Reuters reports:

Portugal appointed J.P. Morgan as financial advisers in the planned privatization of the national postal service...The privatiszation is part of a wider state property sell-off by Lisbon ordered under the country's 78 billion euro EU/IMF bailout.

There a strong Chicago connection in all this. It's Bill Daley, brother of the ex-mayor, who just announced he's running for governor. Daley was a V.P. for J.P. Morgan who made a cool $8.7 million the year before becoming Obama's chief-of-staff.

I'll be looking for news about the upcoming general strike called by the country's biggest unions on June 27th.