NEW YORK — Salvatore Calvanese, the treasurer of Springfield, Mass., for four years, had a ready defense for why he risked $14 million of taxpayer money on collateralized-debt obligations laden with subprime mortgages in 2007.

He didn't know what he was buying, he says, and trusted the financial professionals who sold them and told him they were safe.

"I thought they were money markets that were just paying more," Calvanese said. "Nobody ever used the term 'CDO,' and I am not sure I would have known what that was anyway."

Such financial mistakes, often enabled by public officials' lack of disclosure and accountability for almost 90 percent of government financings in the $2.8 trillion municipal bond market, are costing U.S. taxpayers as much as $6 billion a year, according to data compiled by Bloomberg in more than a dozen states.

The money lost — when the worst recession since the Great Depression is forcing local governments to cut university funding, delay paying bills and raise taxes — is enough to buy health care for everybody in Minneapolis; Orlando, Fla.; and Grand Rapids, Mich., according to figures from the U.S. Census Bureau and the U.S. Department of Health and Human Services.

TRANSPARENCY KEY

Florida county commissioners approved no-bid deals with their favorite banks in an arrangement that led to criminal convictions. Pennsylvania school board members lost $4 million on an interest-rate swap agreement they didn't understand in the unregulated $300 billion market for municipal derivatives.

Local agencies in Indianapolis, Philadelphia, Miami and Oakland, Calif., spent $331 million to end interest-rate swaps with banks including JPMorgan Chase & Co. of New York and Charlotte, N.C.-based Bank of America Corp. during the past 18 months. The swaps, agreements to exchange periodic interest payments with banks or insurers, were intended to cut borrowing costs, but payments increased instead.

Even Harvard University, whose endowment of $26 billion makes it the world's richest academic institution, fell for Wall Street's financing in the dark: During the year ended June 30, the Cambridge, Mass.-based university paid $497.6 million to investment banks to cancel $1.1 billion of swaps.

The public needs more transparency in municipal debt transactions, said Elizabeth Warren, chairwoman of the Congressional Oversight Panel for the Troubled Asset Relief Program. Proposed reforms, such as an oversight agency for consumer finance, could help spur improvements, she said last month.

"We need a worldview change about transparency, and that includes municipal finance," said Warren, a professor of bankruptcy law at Harvard Law School.

The public paid extra costs for borrowing with tax-exempt bonds because local governments resist providing investors the same level of disclosure as corporate borrowers, which file quarterly reports.

State and local governments that sold $43.8 billion of taxable Build America Bonds this year will pay $385 million a year more in interest than similarly rated corporate borrowers, based on data compiled by Bloomberg.

The bonds, for which the federal government subsidizes 35 percent of interest costs, pay an average yield that's 0.8 percentage points more, relative to benchmark rates, than yields for corporate securities with the same credit ratings, the data show.

WARNINGS IGNORED

As a result, it costs New Jersey road authorities, Georgia sewer districts and other agencies more to borrow, even though they, unlike corporations, can raise fees or taxes to make up for deficits.

Discounted to their present value, those additional payments by municipal borrowers add up to $6.1 billion over the life of the debt.

"I think it's horrendous, but it's very hard to get anybody to pay much attention to it," said Stanley Langbein, a law professor at the University of Miami and a former tax counsel at the U.S. Treasury in Washington.

Underwriters — banks or securities firms that guarantee the purchase of debt issuers' bonds — have an interest in keeping prices low, and yields high, because it means higher returns for them and the first investors, Langbein said.

Many Build America bonds traded at higher prices immediately after agencies sold them, a sign that taxpayers lost, he said.

The Government Finance Officers Association, a professional group based in Chicago, warns municipalities of "competing objectives" in their relationships with underwriters. Many don't heed that warning, said Christopher "Kit" Taylor, who was the top regulator of the municipal bond market from 1978 to 2007.

"They're suffering from Stockholm syndrome," he said, referring to the psychological phenomenon in which hostages begin to identify with and grow sympathetic to their captors. "They are being held hostage by their investment bank."

'NOBODY LOOKS'

Public officials shunned competitive bids for more than 85 percent of the $308.9 billion in new tax-exempt bond sales in the first nine months of this year, according to data compiled by Bloomberg. That's up from 17 percent in 1970 and 68 percent in 1982, according to the Government Accountability Office.

Most borrowing costs that state and local taxpayers incur are set in private negotiations. Finance professionals say no-bid sales allow them to market debt to particular investors, helping issuers find demand when credit markets are tight.

The method boosts interest rates by as much as 0.06 percentage point, according to several academic studies reviewed by the GAO.

Other financial mistakes can be difficult to quantify. Taylor, who studied government finances for 30 years as the executive director of the Municipal Securities Rulemaking Board, the overseer of the tax-exempt bond market, said as many as five out of 10 local governments "aren't getting the best deal by a long shot" on their investments.

Even though Congress is considering legislation to regulate the financial adviser, there are other gaps.

Federal law exempts the municipal market from rules regarding disclosure and enforcement that apply to companies. And transactions between broker-dealers and municipalities are rarely scrutinized by the self-regulatory agencies that banks and securities firms use to police themselves, including the Financial Industry Regulatory Authority, said Taylor, the former MSRB chief.

Finra and other regulators presume that institutional clients are sophisticated enough to look after themselves, he said.

"Typically, what happens is, nobody looks," he said. "Finra doesn't look, the firm doesn't look, the city council doesn't look and the populace, the taxpaying populace, has no idea any of this is going on."