by Amanda Alix, The Motley Fool Jun 10th 2013 8:57AM
Updated Jun 10th 2013 9:20AM
The welcome announcement that Jefferson County, Alabama, may finally be getting out from under the bankruptcy cloud that has hung overhead for 18 months was paired with the news that JP Morgan Chase may lose up to $1.6 billion on the deal. How can this be?
Part of the reason is that the big bank has agreed to forgive $842 million of the debt Jefferson County still owes from the financing arrangement made years ago on the county’s new sewer system. The other part is the $722 million that JP Morgan paid the Securities and Exchange Commission in 2009 to settle corruption charges tied to that transaction — which resulted in the single most expensive municipal bankruptcy in this nation’s history.
An incredible tale of greed and corruption — really
The story of Jefferson County’s demise began in 1996 with a federal judge’s decree that the county fix its antiquated sewer system, which was polluting nearby waterways. As Matt Taibbi reports, instead of stopping at needed repairs, county commissioners signed on to build a state-of-the-art sewer system that would prevent future overflows.