My moth­er was shocked. ​“So instead of pay­ing what he would over the next 15 years, he’s just pay­ing them now?” she asked. I nod­ded. ​“That’s just more mon­ey for the banks,” she replied. ​“Why would he do that?”

I told her, in a mix of Eng­lish and our native Urdu, that the city had entered into these bad deals that had cost tax­pay­ers mil­lions of dol­lars, and that a group of us have been call­ing on the may­or to sue the banks to get the mon­ey back. I also told her that, instead of suing the banks, the may­or was try­ing to pay them all of the future pay­ments for the next 15 years right now in order to get out of the deals.

In an unprece­dent­ed move on Wednes­day, the Chica­go City Coun­cil rebuked May­or Rahm Emanuel’s plan to vol­un­tar­i­ly pay banks $106 mil­lion in penal­ties to ter­mi­nate the city’s remain­ing inter­est rate swap agree­ments. In anoth­er unprece­dent­ed move, I attempt­ed to explain to my moth­er what had happened.

Emanuel claims that vol­un­tar­i­ly pay­ing the banks would have helped the city reduce risk. How­ev­er, the biggest risk with these swaps is that if the city is forced to ter­mi­nate them in the future, it could be forced to pay up to $106 mil­lion in penal­ties. By vol­un­tar­i­ly pay­ing those penal­ties now, the city wouldn’t have reduced risk; it would have real­ized it.

In a press con­fer­ence on Tues­day, Alder­man Car­los Rosa said, ​“It’s like claim­ing that you’ve low­ered the risk of your car get­ting stolen tomor­row by hand­ing your car keys to a thief today.”

When Chicago’s cred­it rat­ing was down­grad­ed to junk last spring, that trig­gered ter­mi­na­tion claus­es on sev­er­al of the city’s inter­est rate swaps. Chica­go had to pay approx­i­mate­ly $185 mil­lion in ter­mi­na­tion penal­ties at the time. That was on top of the $537 mil­lion in pay­ments the city had already made on the preda­to­ry swaps up to that point.

But the city has addi­tion­al swaps that have not been trig­gered. Rather than fight­ing those deals, the may­or is now try­ing to vol­un­tar­i­ly ter­mi­nate them by ​“pay­ing the entire ran­som,” as Alder­man Scott Wagues­pack described it.

Pay­ments for swap ter­mi­na­tion penal­ties were includ­ed in a broad­er $2.6 bil­lion bor­row­ing pack­age that Emanuel sent the city coun­cil for autho­riza­tion. So under his plan, the city would have bor­rowed mon­ey (that it would have had to repay with high inter­est rates due to the city’s low cred­it rat­ing) to pay these penal­ties to the banks.

Mem­bers of the Pro­gres­sive Cau­cus of the Chica­go City Coun­cil chal­lenged the deal and got the autho­riza­tion for the swap penal­ties stripped out of the broad­er pack­age. This was a big win for com­mu­ni­ty lead­ers who have beenchal­leng­ing the deals for years.

How­ev­er, this was just a first step. In order to get out of these deals with­out penal­ties and recov­er tax­pay­er loss­es, Chica­go should also take legal action against the banks that mar­ket­ed and sold the tox­ic swaps to the city. Cities like Philadel­phia and Hous­ton have sued banks for ille­gal­ly manip­u­lat­ing the inter­est rates on which their swaps were based. Many of Chicago’s swaps were also based on those same rates that the banks have admit­ted to rig­ging.Oth­er cities, like Reno, Modesto, and Pitts­burg, CA, have filed claims against banks for mis­rep­re­sent­ing risks asso­ci­at­ed with preda­to­ry finan­cial deals.

The may­or should also use Chicago’s lever­age as a cus­tomer of Wall Street to force the banks to rene­go­ti­ate these deals and waive ter­mi­na­tion penal­ties. As Car­rie Sloan and I wrote in our report about Chicago’s finances last year, ​“Chica­go con­trols $78 bil­lion of poten­tial finan­cial busi­ness. This is $78 bil­lion that Wall Street would like to get its hands on, so it gives Chica­go a tremen­dous amount of bar­gain­ing pow­er over Wall Street firms.” Last spring, we argued that Emanuel could launch a debt strike against the banks that hold the city’s swaps and sim­ply refuse to make any more swap pay­ments until they agree to rene­go­ti­ate. That still holds true today.

Already the City of Chica­go and Chica­go Pub­lic Schools togeth­er have paid banks more than $1.1 bil­lion for swap deals. With the city and school dis­trict both fac­ing record bud­get crises, it is high time for city offi­cials to do every­thing in their pow­er to stop banks from raid­ing the city’s cof­fers. Chicagoans’ tax­pay­er dol­lars should go toward pro­vid­ing res­i­dents with vital ser­vices, not — in the words of my moth­er — ​“more mon­ey for the banks.”