Monday, October 26, 2009
Boy, we sure have come a long way in this country when even someone with a good Italian name like Salvatore Calvanese gets taken for a ride by the financial "pros". Details are in this fascinating Bloomberg report about how nearly the entire public sector investor community was duped a few years ago by Wall Street.
Salvatore Calvanese, the treasurer of Springfield, Massachusetts, for four years, had a ready defense for why he risked $14 million of taxpayer money on collateralized-debt obligations laden with subprime mortgages in 2007.The whole thing is worth a look and, naturally, it mentions the state of New Jersey continuing to pay Goldman Sachs somewhere around $1 million a year for interest rate "insurance" on bonds that it no longer owns.
He didn’t know what he was buying, he says, and trusted the financial professionals who sold them and told him they were safe.
“I thought they were money markets that were just paying more,” Calvanese said in an interview. “Nobody ever used the term ‘CDO,’ and I am not sure I would have known what that was anyway.”
Such financial mistakes, often enabled by public officials’ lack of disclosure and accountability for almost 90 percent of government financings in the $2.8 trillion municipal bond market, are costing U.S. taxpayers as much as $6 billion a year, according to data compiled by Bloomberg in more than a dozen states.
Right now, I'm just a bit embarrassed about being Italian.