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The 'Everybody Else Was Doing It' Strategy Fails Another Municipality

We may now have a winner in the derivative blame game competition. Following other successful forays by municipalities, such as Jefferson County, AL, into the derivatives world, the mayor of a small Italian town that was burned by an interest rate swap pins the blame on a combination of peer pressure and the swap agreement being "impossible to understand". Having lost money on the swap since mid-2007, mayor Ortenzio Matteucci, is now a leading expert on the pitfalls of herd mentality.

"At the time I thought: Can the Province of Terni, the City of Terni and all the other municipalities bigger than us, such as Milan, be all wrong?" said Matteucci, 59, dressed in a blue polo shirt and jeans. "You can make a mistake if you don't have an appropriate and deep knowledge of this and just follow what other local governments do."

'Impossible to Understand' Swap Burns 290-Person Italian Hamlet [Bloomberg]