Well, former county commissioner Tom Ellis was installed as county treasurer yesterday. Do you suppose he'll be able to figure out a way to save the county from the interest swaps he sold the county as an investment attorney?

I hear you saying, "Huh? Interest swaps?" These are derivitive products cooked up by the geniuses on Wall Street to fatten their wallets. It invloves trading paying a fixed interest rate for a floating interest rate. Fixed rate payors will want to convert to floating rate if they believe that rates will go lower; conversely, floating rate payors believe that rates may move higher and therefore will want to convert to a fixed rate.

Confused? Me, too. I think it's enough to know that it's gambling that's inappropriate to engage in with public funds. And it's a gamble that has cost the county about $15 million over the last couple of years. This is in addition to the fees that the investment bankers and Tom Ellis charged to set the deals up.

PA Auditor General Jack Wagner thinks they are toxic enough to warrant legislation prohibiting governments from participating in them. Of course, this comes after the horse has left the barn.

Here are links to more stories:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aia5rMTvR2V0

http://www.nytimes.com/2010/03/07/business/07gret.html?emc=eta1

http://action.seiu.org/page/s/stoptheswap

Like the Erie, PA school board, I have only a layman's knowledge of derivatives and am having trouble getting my head around the potential risks.