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.

It is also good to note that some in Congress aren’t sitting on their hands here:

Federal lawmakers, troubled by the rising payouts, are trying to limit the damage to municipalities and prevent them from falling prey in the future. Pending legislation in Congress, introduced by Representative John Lewis (D-Ga.) and Senator Robert Menendez (D-N.J.), would impose a 100% tax on termination payments like those in the CTA deals to dissuade banks from going after struggling municipalities. Another proposal would limit the use of derivatives by localities with less than $50 million in assets; lawmakers figure small towns and cities don’t have the resources to vet the risks of exotic investments adequately.

The progress of that legislation will be worth watching, although it’s unclear if even people with $50 billion in assets have the resources to vet such things adequately.

Great job by BusinessWeek.

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