Name that party--Bribery in Birmingham

NY Times:

J. P. Morgan Securities will forfeit hundreds of millions of dollars in fees on derivatives contracts that it sold an Alabama county, under a settlement announced Wednesday that could offer hope to other governments staggering under similar deals.

The Securities and Exchange Commission charged in a lawsuit on Wednesday that J. P. Morgan had made unlawful payments to friends of Jefferson County’s commissioners in a scheme to win lucrative business from the county to sell bonds and trade in derivatives.

The lawsuit also named two former J. P. Morgan employees. One of those men has already served a short prison term for manipulating similar bond deals in Philadelphia.

To settle the lawsuit, J. P. Morgan will drop its claims for $647 million in termination fees it had been trying to make Jefferson County pay on the derivatives. The settlement also calls for J. P. Morgan to pay a $25 million penalty to the commission and $50 million to the county.

Over the last decade, thousands of governments around the country entered into deals linking bonds with derivatives, forming complex structures that were supposed to hold down borrowing costs. Many of the deals did not work out the way officials expected them to, partly because financial markets froze last fall and partly because interest rates moved sharply in unexpected directions.

But not every local government can count on relief just because a financial mistake was made. The Jefferson County case involved clear-cut bribes and a criminal conviction, and other governments may be hard pressed to persuade their bankers to change their financial contracts unless they can show laws were broken.

The S.E.C. says the definition of improper activity varies by state, and it is pressing for a uniform federal standard.

...

Actually the Municipal Securities Rule Making Board was set up to create a uniform standard for conduct in these types of transactions. They should start with an examination of those rules. I suspect they will find some areas that cover this kind of misconduct.

And, would you believe that the people in Birmingham who got the money from J.P. Morgan were Democrats? Democrats have created an embedded culture of corruption in large cities across this country. While the ones in Birmingham may have been more creative, they were also spectacularly wrong and have put their city on the brink of bankruptcy.