Justifying Stupidity

I thought I was immune to government stupidity. Normally, no amount of government stupidity surprises me.

But…

The Kenosha Unified School District is one of five in southeastern Wisconsin that have lost a lot of money by investing in something called synthetic collateralized debt obligations, the same absurd financial maneuver that has brought A.I.G. to the brink of collapse and made it a symbol for excess and corporate welfare.

Collateralized debt obligation investments are essentially bets on other people’s debts — mortgages, car loans, business loans, etc. If the debtors pay their bills, the investors get a kickback in exchange for agreeing to cover the debt should the debtors default.

In case you haven’t heard, there has been a lot of defaulting these days. Kenosha’s $37.5 million “investment” is now worth perhaps $950,000 or less. Altogether, the five Wisconsin school districts — Kenosha, Whitefish Bay, Waukesha, West Allis and Kimberly — borrowed $200 million via a network of German, Irish and Canadian lenders to make the investments, and have, by most accounts, lost almost all of it.

That’s right, those School Boards borrowed $200 million dollars to invest in speculative investments and have now lost almost all of it.

At least it was done “for the children.”

That always justifies everything.

This entry was posted on Friday, March 20th, 2009 at 5:09 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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