“Jan. 17 (Bloomberg) — The third-poorest city in Pennsylvania is a lot poorer because of a 28-year bet on interest rates that already has gone awry.

The Reading, Pennsylvania, school district, which has 18,323 students, this week must pay $230,000 to Deutsche Bank AG, Germany’s largest bank, because it’s on the losing side of a wager that long-term interest rates will rise faster than short- term interest rates. In April, the board rushed approval of the so-called interest rate swap in eight days after its adviser said the transaction may earn the district $16 million by 2034.”

When I read stuff like this, it just makes me angry. I’m not sure whether I should be angrier at the crooks - pathetic investment bankers, stealing from the naive, or the idiots - elected dummies who seem to think the investment bankers are their friends. I guess that I come down on the side of the bankers being the worst. I can just see them laughing and high-fiving on their way back to the office after the school board meeting. The school board at least had good intentions.

“Local governments from Augusta, Georgia, to Oakland, California, are being lured by similar opportunities to speculate with derivatives created by the world’s biggest banks. Most of the $400 billion of private agreements sold to municipalities escape taxpayers’ notice and are little understood by the public officials and administrators who approve them.”