Only America Could be That Dumb?
That's the gist of many a protectionist/socialist European politician's whine about derivative securities and the world financial implosion these days. This is an American, or an "Anglo-Saxon" problem (for those who like to lump the Brits in with the U.S.) the story goes.
Next time you hear that, show 'em all this.
Many European municipalities were buying derivative junk they didn't understand, and now that they're on the hook, they're ticked at the snake-oil salesmen, even when those snake-oil salesmen came from their own backyard.
Municipal authorities across Europe are reporting losses from derivatives since credit markets unraveled in the slump triggered by the collapse of the U.S. subprime mortgage market in August 2007.
Milan’s financial police seized 476 million euros of assets from UBS AG, Deutsche Bank, JPMorgan and Depfa Bank Plc this week in an investigation into alleged fraud linked to the sale of interest-rate swaps, which are designed to protect buyers against losses caused by fluctuations in borrowing costs.
The city is suing the banks after losses on derivatives purchased in 2005, and alleges the lenders misled municipal officials on the advantages of the securities. Officials at the banks declined to comment, as did a spokesman for Milan’s city council.