Bankers who sold Detroit interest rate swaps placed "a ticking time bomb" in their structure, the city's emergency manager said in court as a trial resumed over a proposal for canceling the transaction.
Although the city collected $40 million over eight months from the swaps deal, falling interest rates helped the banks behind the deals turn a profit, Kevyn Orr, the emergency manager, testified today before U.S. Bankruptcy Judge Steven Rhodes in Detroit.
Since 2009, the city has paid more than $200 million to the banks behind the swaps, according to public records. The city has proposed paying UBS AG and Bank of America Corp. a $165 million termination fee to get out of the swaps contract.
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