Banksters and transit fare increases

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(New York, NY – WNYC) A transit union says in a report that one cause of the New York Metropolitan Transportation Authority’s recent fare hikes and service cuts has been hiding in plain sight: financial arrangements called interest rate swaps. Those are deals the authority made with banks on 10 percent of its $33 billion of debt —deals that have gone against the authority and in favor of the banks.

The deals were made between 1995 and 2007, when banks agreed to cover the fluctuating interest rates on some of the authority’s bonds. In exchange, the NY MTA said it would pay the banks a fixed rate, plus a small premium. That agreement would’ve protected the authority if rates had jumped up. But the Amalgamated Transit Union says the NY MTA has taken a net loss on the deals since the economy crashed in 2008 and interest rates fell to sustained, historic lows.

The union says the authority is now losing almost $114 million a year ― and could continue to lose money on the deals for the next 20 to 30 years.

NY MTA spokesman Adam Lisberg disputed the union’s calculations, saying the swaps brought predictability to the authority’s budget, which needs to be balanced each year. “To compare transactions we entered into years ago, compared to what you can get in risky variable rate debt right now is either irresponsible or deliberately misleading,” he said. “They are simply wrong.” ..............(more)

The complete piece is at: http://transportationnation.org/2012/06/07/report-transit-fares-high-and-rising-blame-bailed-out-banks/

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