" Between 2002 and 2003, Jefferson County, led by current Birmingham Mayor Larry Langford, paid JPMorgan and a group of banks $120.2 million in fees for derivatives that were supposed to protect it from the risk of rising interest rates, according to a series of stories published by Bloomberg News in 2005. When interest rates unexpectedly fell, the county was unable to make sudden payments on its debt.
The public financings have pushed the county toward insolvency and more than tripled Jefferson County residents’ sewer bills. "
" Since then, Jefferson County’s annual sewer debt payment rose to $460 million, more than twice the $190 million it collects in revenue. The county couldn’t refinance the bonds without paying hundreds of millions of dollars in fees to get out of the swaps, and it didn’t have the money to do that. ""In Butler, Pennsylvania, JPMorgan convinced a cash-strapped school district in 2003 to sell it an option on an interest-rate swap, a so-called swaption, for $730,000. The district later said it had been duped by the bank. Last year it repaid JPMorgan seven times what it had received to get out of the deal."
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