More on the National Guard story, courtesy of Moe at Clusterstock.
And welcome to Moe Tkacik and Lawrence Delevingne! You may have noticed, we have many excellent PSW contributors from The Business Insider/Clusterstock – Henry Blodget, John Carney, Joe Weisenthal, Dan Colarusso, Jay Yarow, and now Moe Tkacik and Lawrence Delevingne. Their site is great resource for up-to-the minute insight on breaking market news. – Ilene
National Guard Needed To Protect Alabama County From Fatal Interest Rate Swaps
A few years ago Jefferson County, Alabama bought 17 interest rate swaps from JP Morgan, Lehman Brothers and Bank of America with the intention of hedging interest rate risk.
Today the county said it may need the National Guard to hedge the the "anarchy risk" it now faces as a result of the fiscal disaster its venture into "sophisticated" derivatives turned out to be.
In a sequence of events that played out in state capitals, city halls, and school and public utility boardrooms throughout the country , Jefferson County officials bought into complex interest rate swap contracts they didn’t understand, at much higher prices than the going rate, only to face hundreds of millions of dollars in sudden collateral calls when the subprime mortgage crisis began.
Jefferson County’s collateral calls came when credit rating agencies downgraded the monolines insuring its swaps contracts, Financial Guaranty and XL Capital Assurance, last year, when all the major monolines were beset with downgrades following a fatal foray into the business of "insuring" subprime mortgage-backed CDOs and other asset-backed securities.
Source: Guard troops may be needed in troubled Ala. county, AP
BIRMINGHAM, Ala. – The sheriff in Alabama’s most populous county may call for the National Guard to help maintain order, a spokesman said Tuesday, after a judge cleared the way for cuts in the sheriff’s budget and hopes dimmed for a quick end to a budget crisis.
Circuit Judge Joseph L. Boohaker ruled that leaders in Jefferson County — now trying to head off a municipal bankruptcy filing of historic proportions — could go ahead with plans to slash $4.1 million from the budget of Sheriff Mike Hale, who had filed a lawsuit that temporarily blocked spending cuts for his office.
About 1,000 county workers already are on unpaid leave because courts threw out a key county tax, and Hale has warned that reductions to his budget would mean fewer patrols by deputies and decreased courthouse security.
A spokesman for Hale, Randy Christian, said the sheriff told Gov. Bob Riley after the ruling that state assistance may be needed to perform basic law enforcement tasks once the department’s current funding is exhausted in early September.
"We will certainly be looking at calling in the National Guard," said Christian… Continue here >>
