* Dow Jones Business News…

The Chicago Board of Education was desperate for cash. Two Wall Street players were willing to lend it — at a price.

J.P. Morgan Chase & Co. and Chicago-based Nuveen Asset Management have made realized and paper profits exceeding $110 million on purchases this year of $763 million in Chicago Public Schools bonds. The school system needed the money to replenish its dwindling coffers before the new school year and to build and repair facilities.

The school system’s bonds are a favorite for John Miller, Nuveen’s co-head of fixed income, who said the firm bought when the market feared a default, a concern he called overblown. “At the end of day, this school system is critically important to Chicago — to the whole country really,” he said.

“We took a period of market risk on behalf of our client when they needed it most and the market has recognized their improved financial position,” a J.P. Morgan spokeswoman said. […]

Prices of outstanding Chicago school bonds were hit in 2013 and 2015 after defaults by Detroit and Puerto Rico. Illinois Gov. Bruce Rauner called for a state takeover of the school system and for a potential bankruptcy filing over the past year and prices fell below 75 cents on the dollar.

Nuveen determined that the default risk was far lower than that implied by the bond prices.

Smart move by Nuveen and Morgan. They figured out what others missed: The governor was just jaw-boning and that his ideas wouldn’t actually be put into place. They wound up making out like bandits.

* Meanwhile, this is from an SEIU Healthcare union media advisory…

Taxpayers to Rauner: Yes or No — Will you stand up to banks on near $1 billion payout on toxic swap deals?

Coalition demands that governor call on bank CEOs to extend deadline on ‘toxic’ interest rate swap deals

SPRINGFIELD—College professors, students, home healthcare workers, child care providers and others will call on Gov. Rauner to save taxpayers a near $1 billion payout to big Wall Street banks, money that instead could fund vital social services and education programs now being slashed by the Rauner administration.

The coalition will make the demand during an 11 a.m. press conference on Tuesday, Oct. 4, in the Blue room at the State Capitol Building, 301 S. 2nd St. Several Wall Street banks hold documents called Letters of Credit on toxic interest rate swap loans. The letters of credit expire on Nov. 27, triggering an immediate payout of hundreds of millions of dollars in addition to additional fees and penalties unless the banks extend the letters of credit.

Wanna guess who initiated those “toxic” swaps? Rod Blagojevich, SEIU’s bestest pal. Somehow, that isn’t mentioned in the release.

* But Blagojevich’s involvement is highlighted by the governor’s office today…

Rauner Takes Steps to Reduce Risks from Blagojevich-Quinn Inherited Financial Deals

Administration Spent Last Year Working to Reduce Taxpayers Financial Risk

SPRINGFIELD – Over the past several months, the Rauner Administration has taken steps to reduce the state’s financial risk on interest rate swaps and letters of credit. The Governor’s Office of Management and Budget (GOMB) recently completed renegotiations with all the banks that hold the State’s swaps to reduce the state’s financial risk.

“Governor Rauner inherited these swaps and letters of credit, which have been hanging over the heads of Illinois taxpayers for years,” Rauner spokeswoman Catherine Kelly said. “The Rauner Administration has successfully negotiated better terms for Illinois’ taxpayers, which have reduced our financial exposure and increased our ability to direct the state’s limited resources to education and social services.”

The new terms are more favorable to the state and reduce the state’s financial risk. Under the new terms, the State is less likely to have the swaps terminated and owe a payout to the banks because the credit rating thresholds that allow the banks to terminate have been lowered. These new terms are better for the State than the terms agreed to by the Quinn administration in 2013 and the Blagojevich administration in 2003.

The Governor’s Office of Management and Budget has made negotiating with the providers of letters of credit a priority with the goal to renew or replace them prior to the expiration date of November 27, 2016. […]

In October of 2003, the Blagojevich Administration negotiated five separate, interest rates exchange agreements totaling $600 million. At the time they cost the state 4.16% in interest and fees, they now cost Illinois 6.79% in interest and fees.

The payouts the State would owe to banks now if all the swaps were terminated is approximately $150 million. If the letters of credit are not renewed or replaced, there would be additional obligations on the State.