Breaking the Cycle of Financial Abuse: Communities and the Chicago Tribune Take a Stand Against Wall Street

Breaking the Cycle of Financial Abuse: Communities and the Chicago Tribune Take a Stand Against Wall Street

by Alex Taliadoros The Chicago Tribune followed-up its investigation of the Chicago Public Schools’ toxic finance deals with three new articles that point to how we can start to reverse the trend of financial abuse that our communities have suffered from Wall Street. The way forward begins with cities and states promptly taking legal action to recover funds lost due to misleading or deceptive behavior from banks. In addition, the federal government needs to properly oversee the municipal finance market if it hopes to prevent other local entities from falling victim to unfair lending practices in the future. Chicago officials have thus far rejected calls to win back the money lost in predatory deals. Despite Mayor Emanuel’s insistence that his hands are tied by these costly financial deals, the Tribune found ample evidence of municipalities successfully recouping millions of taxpayer dollars after challenging the same type of problematic auction-rate debt. The article highlights cities as small as Pittsburg, California (population 63,264) that have won substantial amounts to cover their losses from auction-rate securities. Most settlements between public entities and financial institutions remain secret, but the paper cites a conservative estimate of more than $25 million in payouts to municipal issuers. Cities have recovered taxpayer money both by filing claims with the Financial Industry Regulation Authority (FINRA) and by bringing banks to court. They were successful because they were willing to take action against the fraudulent lending practices that have impoverished their schools and hospitals. The Tribune also examines how the Securities and Exchange Commission (SEC) has failed to protect local governments after banks duped them into issuing auction-rate debt....