JPMorgan Chase led four banks in selling interest-rate swaps to Jefferson County at six times the going rate. Now, the FBI is investigating the bankers, the SEC has sued a local politician and the county is on the verge of going bust.
Bankers may well may face criminal charges, BofA is cooperating in exchange for leniency, and the FBI has raided financial advisers. My guess: People will be going to prison.
“It’s ironic that the Fed can do corporate welfare for the banks, but they can’t bail out a county that was victimized by these banks,” says Craig Greer, a Catholic chaplain at a Birmingham hospice.
Bear Stearns sold $3.2 billion in swaps to Jefferson County and was bailed out of bankruptcy by the Fed in March. If Jefferson County goes bankrupt, it will be the biggest county bankruptcy in US history.