Posted on 05/14/2010 7:02:13 PM PDT by TigerLikesRooster
SEC Probes Wall Street Selling of Muni Bonds: Report
Friday, May 14, 2010 08:08 AM
The Securities and Exchange Commission is investigating whether Wall Street banks used their own money to bet in financial markets against municipal bonds that they had sold, the Wall Street Journal reported.
Citing people familiar with the matter, the newspaper reported that the regulator is examining trades of municipal credit default swaps
(Excerpt) Read more at moneynews.com ...
P!
These days it’s a shock if the Wall Street firm is not betting against the cruddy bonds they peddle
These days it’s a shock if the Wall Street firm is not betting against the cruddy bonds they peddle
You never lose this way. No wonder they are coasting through economic crisis.
Betting against Socialism is a sure win. Exorcise excessive gov’t spending and borrowing from the economic system and the dysfunctional market will cure itself. The elites are fooling no one.
The Muni bond market, the muni ratings agency biz, the muni bold reinsurance industry, etc have been in terminal decay since the recession in the 1970’s in the United States (and to some degree Canada).
There is never going to be enough capital in this our brave new world of QE and ZIRP to fund Muni budgets through bond sales. The nominal return on each additional dollar borrowed has for most of the United States been a negative number since the late 1990’s.
Any and every rational player in the Muni market knows this. THose who control funds who buy Muni’s long do so because they were hired to do so and get bonuses based on metrics that fulfill portfolio management strategies that have been run by risk management teams with myopic and nearly illiterate buffoons who never contemplated black swans or even a severe recession in to the stew.
As every rational player knew that the Munis were bound to fail since the Bush I administration, it’s no surprise that the major money center banks were shorting the bond sector.
This stretches to blogs that follow municipalities collapsing, and pension fund collapses... big state pension funds are screwed as they loaded up on what was considered low risk Munis and then chased the risk curve as the portfolio terminally underperformed the metrics.
Bond peddlers suck so much money into bad deals. Big fees for them and debt for the idiot tax payers who send their idiot elected officials to state capitals and Washington to be snookered. Is there enough money in the world to cover all of the debt these guys create?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.