Citizens for Better Government
Blount County Tennessee
Blount County’s “financial weapons of mass destruction”
You all have probably heard about how arcane financial tools, called derivatives, have brought our national and world economy to the brink of destruction. Warren Buffett captured the essence of the problem when he called derivatives “financial weapons of mass destruction”.
Did you also know that our County Finance Director, David Bennett, has been playing the financial derivatives game with our hard earned taxpayer money? Lately, some of these county bond transactions have been “blowing-up” in Wall Street parlance. This is likely to cost Blount taxpayers millions of dollars before the mess is cleaned up. Of course, Bennett had help in creating this mess, from a fellow by the name of Joe Ayres. The NY Times recently ran a front page article on how Ayres firm sold these risky instruments to unsuspecting counties and municipalities in Tennessee.
Conflicts of interest seem to abound in these deals. Joe Ayres of Cumberland Securities represents himself to the County Commission as a “bond advisor”. The New York Times pointed out that Ayres has another job, Managing Director of Morgan Keegan. In that role, he often collects hundreds of thousands of dollars in fees on the risky transactions he is recommending to the Commission. After he gets those fees, another of his organizations TN-LOANS collects fees on the bonds, every year, for the life of the bond. Finally, Regions Financial (aka Regions Bank and major recipient of TARP bailout funds), who owns these entities, often ends up as the bond trustee and collects even more fees.
This is all a little like asking a Chrysler salesman what kind of car you should buy, what price you ought to pay, and what the interest rate should be on your loan.
The NY Times article says this setup is highly questionable. The new State Comptroller put a stop to this madness as soon as he heard about the problem. The Governor of Tennessee says this cozy arrangement is at the core of what went wrong with our bond transactions. But, Blount County Finance Director, David Bennett, says he is making “wise decisions”.
In his recent letter to the Commission on swaps, the Finance Director says: “the five swaps we executed were approved by the Commission”. He puts words in Commissioner’s mouths, saying: “I know most of you will understand the content of this letter” and “many of us have had these discussions many times in my office”. Call your Commissioner and ask he or she whether they really understand these swaps? Even people with long experience on Wall Street have trouble with this stuff. Is this an attempt by Bennett to suck the Commission into this cesspool of conflicts of interest?
Isn’t it time to hire a truly independent organization to do a forensic audit and evaluation of all the County’s bond transactions, before hundreds of thousands more of our hard earned taxpayer dollars end up in the pockets of Regions Financial aka Morgan Keegan aka Cumberland Securities etc.?