A coalition of labor unions and public interest groups is seeking to make banks refund transit agencies for money they are making off the financial crisis, including an estimated $11.1 million it says Metro is overpaying each year.
But Metro told The Washington Examiner Monday that it does not have any of the interest swaps that the ReFund Transit coalition said it does.
Instead, Metro spokeswoman Cathy Asato said the District of Columbia has such swaps, unrelated to any of its subsidies for Metro.
The ReFund Transit coalition, a group made up of various public interest groups and unions including the national branch of Metro’s largest union Amalgamated Transit Union, said in a new report that banks are benefiting from the swaps, squeezing $529 million from transit agencies nationwide.
“When governments and transit agencies issued variable-rate bonds, banks offered them a deal. The banks said that if they would pay a steady, fixed interest rate, then the banks would take care of the variable-rate payment to the bondholders. Banks sold these deals as insurance policies that would let taxpayers lock in lower interest rates without having to worry about rates shooting up in the future.
However, these deals were actually more of a gamble than an insurance policy, and when the banks crashed the economy in 2008 they blew up.”
That means issuers now are left paying above-market rates, while the banks pay variable rates now at historic lows. The coalition is seeking for banks to pay back the difference.
But the report said that Metro loses $11.1 million annually because of its interest rate swaps involving J.P. Morgan Chase, Morgan Stanley and Wells Fargo. Not so, according to Metro.
Metro also may have lost $3.7 million by alleged fraud between August 2007 and May 2010 when banks are accused of colluding to manipulate the London Interbank Offered Rate index, known as LIBOR, the report said. That, too, may be called into question if Metro does not have any of the swaps.