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Pennsylvania School District Exits Interest Rate Swaps

|Includes: PNC Financial Services Group, Inc. (PNC)

Jack Wagner, Auditor General of Pennsylvania, has announced that the Erie School District has terminated an interest rate swap arrangement with PNC Bank (NYSE:PNC).  From the official press release:

Wagner recently notified Pennsylvania school districts to avoid interest-rate swaps, and to terminate any contracts they might have, after his special investigation determined that swaps approved by the Bethlehem Area School District cost taxpayers at least $10.2 million. The investigation also found that 107 of 500 school districts, or 21 percent, and 86 municipal governments had $14.9 billion in public debt tied to interest-rate swaps.

Interest rate swaps are essentially bets on the movement of interest rates on bonds issued by the school districts.

Hat tip to Matt Taibbi at True Slant

Disclosure: No positions.