Who were the winners on interest rate swaps?
In recent months, we have been hearing about institutions and municipalities all over the world who are suffering huge losses on the interest-rate swaps negotiated by U.S. big banks. Jefferson County, Alabama is set to become the largest municipal bankruptcy in U.S. history – due solely to massive losses on the interest-rate swaps sold to the county by JP Morgan (NYSE: JPM, Stock Forum). A recent Bloomberg article on this victim of Wall Street provided no firm estimates as to the ultimate amount of losses suffered. However, we can infer the amount of those losses by looking at another institution scammed in this manner: Harvard University. Harvard recently announced a $500 million loss on its own interest rate swaps, merely to partially exit those swaps. The $500 million covers swaps on just $1.1 billion of Harvard debt (equal to an annual interest rate of nearly 50%). A Bloomberg article on this scam noted that Harvard would pay an additional $425 million in penalties on swaps coverin
