Detroit won’t take legal action for now against Bank of America Corp. and UBS AG over a costly swaps deal, even after canceling a forbearance agreement it reached with the banks in July, Bloomberg News reported yesterday. While they continue trying to negotiate an end to the swaps, which cost taxpayers about $4 million a month, the city and the banks will refrain from taking court action against each other, according to Bill Nowling, a spokesman for Detroit’s emergency financial manager, Kevyn Orr. The forbearance agreement, reached days before Detroit filed the biggest U.S. municipal bankruptcy, was a kind of truce. Detroit agreed not to sue to cancel the swaps and the banks agreed not to declare the city in default of the contracts, which would have allowed them to try to seize casino tax revenue. The city and the banks have been trying to reach a settlement that Bankruptcy Judge Steven Rhodes will accept. Last month, he rejected a proposal to buy out the swaps for $165 million, saying it was too costly.
