CHICAGO – Detroit should drop its plan to unwind its costly interest-rate swaps and instead argue in bankruptcy court that they were unethical transactions that should be declared illegal, a former municipal investment banker said in a report released Wednesday.

Detroit’s swaps, which hedge a chunk of its pension certificates, represent one of its riskiest financial transactions, and helped drive the city into declaring bankruptcy, Wallace Turbeville, senior fellow at the progressive policy group Demos, said in the report, “The Detroit Bankruptcy.”

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