Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

The Financial Times reports today on derivative deals gone bad in little Italian villages. Their poster child is Baschi, population 2,800, but it goes way beyond that:

Between 2001 and 2008, 525 Italian local authorities entered into almost 1,000 interest rate swaps with an aggregate value of €35bn, according to Italy’s audit office and the central bank….Scores of these deals are now turning sour, dragging Italian banks such as BNL and global institutions such as Merrill Lynch, UBS, Deutsche Bank and JPMorgan into court.

This is embarrassing for Italy, as the state is widely considered to have failed to control the deals involving cities as large as Milan to a tiny Order of Capuchin Friars near Genoa. It is also extremely embarrassing for investment banks. Investigations by Italy’s finance police have led to raids, the seizure of assets and bankers being named in criminal cases. One prosecutor in south Italy has asked that Merrill Lynch be banned from doing business with municipalities for two years.

Hey, Merrill Lynch! I remember them. That’s the company that entered into a whole bunch of derivative deals with my hometown of Orange County in the early 90s and drove us into bankruptcy. I guess you can take the investment bank out of the hustle, but you can’t take the hustle out of the investment bank. Or something.

This comes via Felix Salmon, who notes that “municipalities around the world have been ripped off by fast-talking derivatives salesmen for years, and the whole business really is very sleazy.” As it happens, there was a bit of sleaze on both sides, probably, as these small towns were all hoping to get something for nothing and figuring that if a piper needed to eventually be paid, some future mayor would have to pay him. But the whole piece is worth reading. It’s a nice look into the incredibly complex deals that these banks put together and sold to plainly unqualified buyers.

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate