In Alabama, Jefferson County residents pay $50 a month for a sewer system whose construction generated millions of dollars in fees for JPMorgan Chase & Co. Now it’s getting a court-appointed receiver, according to Bloomberg. And al.com reports that former Jefferson sewer boss Jack Swann is destined for a lengthy stay in a prison to be determined later. To make matters worse, the sewer system is over-engineered yet difficult to operate.
Now, a couple of years later, there is even more fall-out:
But the real victims of the financial collapse in the US state of Alabama's most populous county are its poorest residents - forced to bathe in bottled water and use portable toilets after being cut off from the mains supply.
The whole saga is more interesting, because a significant part of the problem was the financing (arranged by the great, philanthropic JP Morgan Chase):
The saga of the bankruptcy in the county of Alabama's biggest city, Birmingham, includes a long thread of corruption and fraud as a sewer system upgrade originally projected to cost as little as $250 million wound up saddling the county with unsustainable debts worth billions.
Bad bond and refinancing deals and construction problems helped inflate the debt balloon.
The one bit of good that might come out of this is that JP Morgan Chase might not get back a large amount of the money the county owes them. The description (which I can't find, unfortunately) I read of the original debt was that it involved credit rate swaps. Essentially, they were trying to hide how much debt they were generating by getting into obscure derivatives that, if everything went right, would keep the payments low for a while. Getting into those kinds of transactions, without knowing exactly what you're doing, is a fool's game, so, to a degree, the county deserves what it got.
Well, the people responsible are all gone from office, but now we see how the fallout continues for a lot of undeserving people, years later. This is what comes of "do whatever you can to win the next election" governance. In this case, the "do whatever you can" involved trying to hide a body (the size of the long-term debt) that wasn't quite dead yet.