Sunday, February 23, 2014

"Swapping Our Futures" - revisited

The Swapping Our Futures title comes from a public sociology paper based on UC Berkeley grad student research-here is the link ..
ok, so...
Today in the news-- San Jose Mercury News carries an Associated Press piece: Risky Deals Costing University of Calif. Millions

The financially strapped University of California system is losing about $6 million each year due to risky bets on interest rates under deals pushed by Wall Street banks.
The Orange County Register reported ( that the UC system already has lost tens of millions of dollars on complex contracts known as interest-rate swaps.
The newspaper reported that schools in the system could lose as much as $136 million over the next 34 years. Future losses would be reduced only if interest rates rise.

The losses come as UC administrators have sharply increased tuition and fees in recent years, angering many students who say they are being priced out of a public education.

The university system's chief financial officer, Peter Taylor, told the newspaper he is confident interest rates will increase, reversing the losses. "We have a long-term view," he said.

Taylor was a top banker at Lehman Brothers Holding Inc. when in 2007 the now-defunct bank sold interest-rate swaps to the University of California, Los Angeles. Since the university system hired Taylor in 2009, he has signed other contracts when he judges they will save money over the cost of traditional debt, the newspaper reported.

and the OC Register piece- 4 page piece, so click- by Melody Petersen: UC lost millions on interest-rate bets
University accountants estimate the 10-campus system will lose as much as $136 million over the next 34 years on complex contracts.

includes this: Michael Greenberger, a law professor at the University of Maryland and an expert in derivatives, said most public officials agreeing to enter the swap agreements don't understand the risks. The agreements include boilerplate terms, he said, that protect the banks' interests.
“It's a total nightmare,” he said, “and you can't get out of it.”

Questions about the swaps, including by Governor Jerry Brown, came up at a Regents meeting in late 2012 after a group of doctorate students from Berkeley wrote a paper about the losses. Taylor told the board that the students’ paper was wrong. The university has been careful with its debt program, he said, and has not taken imprudent risks.

Lehman Bros comes up in the piece and Di Fi and Blum - but there is no mention of something that Taylor mentioned at a UC Regents meeting a while back- during a presentation he made at the March 2013 UC Regents meeting, it was mentioned that Taylor sits on the Municipal Securities Rule Making Board, but that does not come up in this current piece so not sure if he still does. The video for the March 2013 video is no longer accessible here - you might try finding an audio clip from that meeting at UCLA Fac Blog, good luck. okay so it looks like Cal Pol Issues was checking into that May 2013

and here one section of the March 2013 meeting:

FOUND IT!- Listen to the 46:30 mark here:

and another: - could be in the comm. on finance section at 11am -- pointed to it in this post

the other story that broke this week:
Center For Investigative Reporting: UC endowment has worst investment returns among largest US college funds

reminder: the UC Regents Investments Committee meets on February 27th

and there's the UC-Hellman along w/ the Hellman-Lehman history that goes back, too (btw Cal got some nice artwork recently)

No comments:

Post a Comment