CAN'T HAVE IT BOTH WAYS: Bennet Can't Claim Concern Over A Partisan Witch Hunt He Called ForReports abound that Denver Public Schools, in partnership with the top brass in the Democratic Party, are hurriedly trying to pass legislation in the final hours of the legislative session that would clean up a big bank deal gone bad that continues to dog the inner city district.  Well, and embattled Sen. Michael Bennet.

The Bennet Bailout was killed earlier this week, but there are efforts under way to resuscitate it. Not only is the Denver teachers union making noise, but this risky bank deal gone south also threatens Bennet’s Senate (or other?) bid.

Readers may recall that Bennet’s scandal is the source of some friendly fire – a petition hammering the former DPS chief and current U.S. Senator for his tawdry borrowing scheme.

As the legislature wrestles with the Bennet Bailout, it is worth going back and reading the original shocking New York Times report that first brought all this to light. From NYTs banking hall monitor, Gretchen Morgenson:

In the spring of 2008, the Denver public school system needed to plug a $400 million hole in its pension fund. Bankers at JPMorgan Chase offered what seemed to be a perfect solution.

The bankers said that the school system could raise $750 million in an exotic transaction that would eliminate the pension gap and save tens of millions of dollars annually in debt costs — money that could be plowed back into Denver’s classrooms, starved in recent years for funds.

To members of the Denver Board of Education, it sounded ideal. It was complex, involving several different financial institutions and transactions. But Michael F. Bennet, now a United States senator from Colorado who was superintendent of the school system at the time, and Thomas Boasberg, then the system’s chief operating officer, persuaded the seven-person board of the deal’s advantages, according to interviews with its members.

Rather than issue a plain-vanilla bond with a fixed interest rate, Denver followed its bankers’ suggestions and issued so-called pension certificates with a derivative attached; the debt carried a lower rate but it could also fluctuate if economic conditions changed.

The Denver schools essentially made the same choice some homeowners make: opting for a variable-rate mortgage that offered lower monthly payments, with the risk that they could rise, instead of a conventional, fixed-rate mortgage that offered larger, but unchanging, monthly payments.

The Denver school board unanimously approved the JPMorgan deal and it closed in April 2008, just weeks after a major investment bank, Bear Stearns, failed. In short order, the transaction went awry because of stress in the credit markets, problems with the bond insurer and plummeting interest rates.

Since it struck the deal, the school system has paid $115 million in interest and other fees, at least $25 million more than it originally anticipated.

To avoid mounting expenses, the Denver schools are looking to renegotiate the deal. But to unwind it all, the schools would have to pay the banks $81 million in termination fees, or about 19 percent of its $420 million payroll.

For reasons we do not understand, the local press has almost totally whitewashed this disaster. And now some in the legislature want a bailout to boost the whitewashing effort. Let’s call this what it is – a taxpayer-funded Bennet Bailout, designed to save Bennet’s shaky campaign.