Sound the alarm and round up a posse. Wall Street banks are making off with funds that Illinois desperately needs and Governor Bruce Rauner is a willing accomplice. There was hope that amid our state’s current fiscal crisis Governor Bruce Rauner might do the right thing by funding essential services for Illinois families before making voluntary payouts to wealthy banks. No corner of our state has been untouched by the budget crisis and service providers are stretched to the brink as they await funds the state owes them. Instead, we learned that the Rauner administration cut a multi-million dollar check to Wall Street banks – JPMorgan Chase and Goldman Sachs.
It is difficult to imagine that in this moment of financial crisis for our state, the Governor would prioritize voluntary payments to banks. However, Rauner’s Tollway Authority has paid out an interest rate swap early, resulting in JPMorgan Chase and Goldman Sachs receiving a combined $2.7 million in “termination payments.” On a much smaller scale, this is similar to what Mayor Emanuel and Chicago Public Schools did when voluntarily paying hundreds of millions to terminate swaps. The news of this early termination is especially troubling if it reveals how the Rauner administration wants to handle such deals.
Could the next payouts Rauner chooses to make give hundreds of millions in profits to Wall Street banks? Alarmingly, yes, they could.
Though it might be surprising that there has been no questioning of this $2.7 million decision to pay the banks, it is likely because very few people are even aware it happened. It’s almost as if the Rauner administration slipped this money under the table to JP Morgan Chase and Goldman Sachs. The $2.7 million the banks received from the Tollway Authority is $2.7 Million more than the total amount Illinois invested in both Teen Reach and youth summer jobs this year ($0). It is $2.7 million more than the state paid many human service providers during the first year of the budget impasse.
After this payout, the State of Illinois has 18 remaining swap agreements with banks like JPMorgan Chase. Of most concern are those tied to six letters of credit (similar to a cosigner on a loan) also with big Wall St. banks. All six of these letters of credit are set to expire on November 27. If the letters of credit expire, our state will be on the hook for an immediate payout of almost a billion dollars to Wall Street banks. Beginning July 31st, Governor Rauner could have requested a renewal of the letters of credit, thus keeping almost a billion dollars available for state expenses.
Any reasonable observer would see this as the fiscally responsible thing to do. Rauner seems to be choosing to side with the banks – quietly, while people all across our state are suffering. Governor Bruce Rauner must choose the people of Illinois over greedy Wall Street banks like JPMorgan Chase. He should make the right decision and renew the letters of credit today. This would save our state almost a billion dollars.