Dale Burnett stood in the lobby of a Chase bank in downtown Chicago the morning of June 7 and explained why Chase and other big banks need to stop gouging millions from the city’s public transit system. A home care worker who cannot afford a car, Burnett’s job pays her poverty wages and she cannot afford fare increases or service cuts. In contrast, Jamie Dimon, CEO of Chase, has a $23 million compensation package this year. Nationally, 43% of transit riders make under 25,000 annually.
Burnett was among 50 Chicagoland transit riders and community activists who came to send a letter to CEO Jamie Dimon. Representing a coalition of transit riders and transit workers called ReFund Transit, they were asking him to renegotiate the credit default swaps (CDS) that are bleeding public transit across the USA. Simultaneous protests by ReFund Transit were held in other US cities.
Dale Burnett had this to say:
“We are here today because Chase and other big banks are ripping off money for our transit system…I live on the South Side of Chicago. I am a personal assistant for the Illinois Department of Human Services. I provide key life services so an individual can live in their home with dignity.Without me they cannot live and without them, I cannot live. We cannot make any more cuts for vital services, whether its health care, education and transit. I depend upon Chicago’s public transit system for my life.”
Credit default swaps were among a swarm of exotic securities that gestated inside of Wall Street and then burst forth to reproduce across the planet. What follows is the short version of how swaps work. For the long version please download this free report.
How Credit Default Swaps Work
To fund new projects with the swaps, the banks asked that cities and states pay the loans at a fixed rate, but the banks would pay back a variable rate that the cities and states could use to pay the interest. The swaps were kind of rebate, but a treacherous one.
Then came the 2008 Crash, the tax payer funded bank bailout, and the decision by the Federal Reserve to lower interest rates to near zero. Now the banks could borrow from the Fed almost for free, and their swap payments to cities fell to nearly zero. The cities were stuck with a fixed rate of anywhere of 3% to over 6%.