BusinessWeek’s cover story this week on how Wall Street’s shenanigans are threatening already-reeling local governments is a must-read.

The lede anecdote shows the banks putting the screws to Detroit of all places, which is so bad off with a 28 percent unemployment rate it makes the Great Depression (with its peak unemployment rate of 25 percent) look like the good ol’ days.

Wall Street is squeezing one of America’s weakest cities for every penny it can. A few years ago, Detroit struck a derivatives deal with UBS (UBS) and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city’s credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That’s precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.

Recall, UBS is a giant Swiss bank bailed out through the infamous AIG backdoor. It got its $3.8 billion paid off in full by U.S. taxpayers, including Detroiters.

Keep that in mind when reading this:

The Chicago Transit Authority (CTA), having entered into complex arrangements to lease its equipment to outside investors and then lease it back, could face termination fees of $30 million. The investors could collect penalties because American International Group (AIG), which backed the arrangement, has seen its credit rating tumble.

So, UBS and Deutsche Bank and Goldman Sachs and Merrill Lynch and Société Générale and Barclays and Royal Bank of Scotland and Bank of Montreal and Wachovia (now Wells Fargo) and Deutsche Zentral Genossenschaftsbank and Calyon and more get a no-haircut bailout by American taxpayers when their AIG credit insurance goes kerplop, but Chicago? Screw ‘em!

BusinessWeek sets the scene for its story with this excellent context paragraph:

The seeds of this looming disaster were sown during the credit boom, when Wall Street targeted cities big and small with risky financial products that promised to save them money or boost returns. Investment bankers sold exotic derivatives designed to help municipalities cut borrowing costs. Banks and insurance companies constructed complicated tax deals that allowed public utilities, transit authorities, and other nonprofit organizations to extract cash immediately from their long-term assets. Private equity firms, pointing to stellar historical gains, persuaded big public pension funds to plow billions of dollars into high-cost investments at the peak of the market. Many of the transactions shared a striking similarity: provisions that protected the banks from big losses and left the customers on the hook for huge payouts.

This is great stuff—the kind of thing that has made us value BusinessWeek over its less-aggressive competitors. Can you imagine that graph in Fortune or Forbes? Language is critical, as our Elinore Longobardi has written. Instead of wishy-washy neutered language we get: “Wall Street targeted cities big and small with risky financial products.” BusinessWeek’s Theo Francis, Ben Levisohn, Christopher Palmeri and Jessica Silver-Greenberg, clearly identify the bad actor here, rather than playing the referee who doesn’t throw flags, which is how the press too often acts.

Here’s another piece of excellent context:

The financial struggles of America’s cities and towns stand in stark contrast to Wall Street, where bonuses at some firms are expected to reach record levels in 2009, less than a year after the peak of the financial crisis.

This isn’t to say municipalities don’t have responsibility for getting into the mess. As BW points out, many of them knew there was a possibility they could blow up. But, off course, there’s always the asymmetrical-information problem when dealing with Wall Street (see: “‘Being novices, there’s a certain level of trust with decision-makers,’ says Tim Lee, executive director of the Texas Retired Teachers Assn.”), and Lord knows how the bankers presented the risks, but you can bet they weren’t emphasized. What makes this particularly gross is that the bankers created these products and created the conditions that caused them to blow up. Then they got bailed out themselves, are headed for a record payday, and are still leaning on taxpayers for their shoddy products they pushed.

It’s worth noting that Gretchen Morgenson of The New York Times has been on some of this for a while, including the sordid tale of Hoosier Energy Rural Electric Cooperative, included in BusinessWeek’s story.

But that in no way takes away from anything BusinessWeek has done here. This is an ongoing story and it does the best job I’ve seen of putting it all together.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.