News Release 

Big banks are enticing nonprofits into contracts that are costing them billions

Hospitals, schools and municipalities among those curbing services to pay the bill

World Scientific


IMAGE: Cover for "Brazen: Big Banks, Swap Mania and the Fallout " view more 

Credit: World Scientific

For decades, big banks have targeted hospitals, schools, municipalities, state and local governments, universities and other nonprofits across the United States to sell them exotic financial contracts known as interest rate swaps. These contracts have led to wealth transfer to big banks amounting to billions of dollars as well as devastating consequences in the lives of the larger public.

That's according to a new book based on an extensive review of financial records by University of Illinois accounting professor A. Rashad Abdel-Khalik. The book looks at more than 30 cases of what he terms "deception, intimidation and lies", and warns that the bills from bank malfeasance will be coming due for years to come. Prof. Abdel-Khalik also questions whether the contracts should be enforceable as "unconscionable contracts" under the law.

The drain on nonprofits' cash resources due to so-called "interest rate swaps" have made organizations, ranging from charitable hospitals like the Sisters of Charity of Leavenworth Health System to the New York Metropolitan Transportation, victims. To compensate for the drain on their resources, nonprofits have acted in socially destructive ways. To save money to be able to pay obligations to big banks, extreme measures from the shuttering of schools (as in Chicago) to disconnecting water supplies (as in Detroit and Birmingham), to the dismissing of school teachers in an already understaffed education system (e.g., Philadelphia, Chicago and Denver), to raising water and sewer taxes to levels the poor in their communities cannot afford. Citizens of the affected regions have even had to choose between having water or heat in the midst of plummeting winter temperatures. Transit authorities increased the fares they charge and did away with building needed changes in the infrastructure and means of transportation.

"Paying for services not provided, and will never be, rendered." (p.121), local and state governments have paid hundreds of billions of dollars to cancel these contracts while receiving nothing in exchange. The State of New Jersey paid over $800 million, the City of Detroit paid over one billion dollars. The City of Chicago and its public schools paid over $600 million, the City of Denver public school district paid over $212 million... and the list goes on and on. In Brazen: Big Banks, Swap Mania and the Fallout, A Rashad Abdel-khalik argues that virtually none of the banks' customers understood what they were signing, but had signed nonetheless because of lies, deception and/or intimidation. He reasons that this makes them "unconscionable contracts" under the law, which means they are unenforceable and should be voided.


Brazen retails for US$35 / £30 (paperback) and US$98 / £85 (hardback). To order or know more about the book, visit

About the Author

A. Rashad Abdel-khalik is a professor at Gies College of Business at the University of Illinois at Urbana-Champaign, USA. His graduate education was in business, economics and accounting. Over many years and after earning various degrees, he was able to interface the domains of these fields in his writing and research. His last book, Accounting for Risk, Hedging and Complex Contracts (2013), is perhaps the best example of integrating different areas, which he also used to develop a graduate level course on the subject. In the course of writing that book he came across highly costly purchases of large amounts of interest rate swaps by nonprofits. This issue was serious enough that the Department of Sociology at the University of California at Berkeley published a report on the negative impact of interest rate swaps on the University of California as a whole, and medical centers in particular (see Eaton, C. et al. (2013). "Swapping our Future: How Students and Taxpayers Are Funding Risky UC Borrowing and Wall Street profits", Berkeley Journal of Sociology 57, Critical Approaches to Financialization, 178-199). Around the same period, Service Employees International Union (SEIU) joined in publishing a couple of studies, including "Money for Nothing: How Interest Rate Swaps Have Become Golden Handcuffs for New Yorkers" by Michael Stewart (2011). This was the time when Prof Rashad decided to study the socioeconomic impact of the large-scale transactions of interest rate swaps between big banks and nonprofits, which has become his concentrated focus for more than five years while remaining as a professor of accounting and an editor of a research journal. He projects the next phase of his work to be studying and evaluating the huge number of class action suits filed against big banks, mostly by nonprofits. Most of these suits have been consolidated and are now at the U. S. District Court-Southern District of New York.

About World Scientific Publishing Co.

World Scientific Publishing is a leading international independent publisher of books and journals for the scholarly, research and professional communities. World Scientific collaborates with prestigious organisations like the Nobel Foundation and US National Academies Press to bring high quality academic and professional content to researchers and academics worldwide. The company publishes about 600 books and over 140 journals in various fields annually. To find out more about World Scientific, please visit

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