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Univ. of CA Interest Rate Swaps Back in the News

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Our research on interest rate swap losses at the University of California has been back in the news the last couple months.  The Orange County Register published a story in February after University accountants updated estimates, saying that UC stood to lose $136 million over the next 34 years.

Shortly afterwards, the Washington Times and other papers ran an AP story following up on the interest rate swap losses.

Both the OC Register and AP stories neglected to mention that UC sued 20 Wall Street banks last year for losses stemming from manipulation of LIBOR rates — to which interest rate swaps and other derivatives are indexed.  Public banking advocate, Ellen Brown, however, picked up this thread in a piece published by Truthdig and several other outlets on April 13th.

Finally, Institutional Investor Magazine noted that controversy still swirled around UC’s interest rate swaps as UC CFO Peter Taylor departed his position at the end of April.  Taylor was a UCLA Foundation Board member and the Managing Director of Public Finance for Lehman Brothers when the investment bank sold UC one of its most costly swaps.  Taylor then assumed responsibility for UC’s continuation of the swaps when UC hired him as CFO in 2009.  Taylor vehemently defended UC’s use of the swaps even as UC filed the LIBOR suit against banks that sold UC the swaps.  Taylor is leaving UC to lead a foundation funded by a student loan debt collection agency.

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Charlie Eaton

Charlie Eaton is a Postdoctoral Scholar in the Stanford Graduate School of Education. His research looks at how organizations shape inequality through politics, the economy, and social policy. His dissertation is on the financialization of higher education. You can follow him on Twitter @eatoncharlie