Another financial meltdown?

[GoodWitch58]

http://blogs.tampabay.com/venture/2...financial-chicanery-but-now-comes-new-re.html

Municiple Bond Bid-rigging...what will be next?

 

[Here4Good]

In alleged nationwide municipal bond bid rigging conspiracy, Florida taxpayer may be a victim

Municiple Bond Bid-rigging...what will be next?

Hopefully, meaningful financial reform, now that Chris Dodd has finally gotten out of the way.

Why would this NOT happen every year, when absolutely nothing has changed in the political landscape for these criminals? Do crack dealers stop dealing crack because one of their customers dies from the stuff, or because they realize their customers are mugging people and turning tricks to get the money to buy crack? NO! They stop when they are arrested, or when the dealer next door is arrested and sentenced to 50 years, or when the dead customer's brother shows up at their door and kills them.

I know, you don't have to tell me, I have sort of a chip on my shoulder about the so-called "investment banking" firms. I am still waiting for one meaningful negative outcome of all of their twisting of our banking laws to drive nothing but meaningless profits, devoid of any real benefit to the economy (unless you're a cocaine dealer in Manhatten).

 

[beachFool]

From the article the problem was the interest rate paid on Guaranteed Investment Contracts and interest rate swaps And I am trying to figure out why anyone would think either of those is a good idea.

A. Why didn't the municipalities just put the money from the muni bond offering into a local bank until they used it? Why would anyone borrow (issue a bond) then invest the proceeds in something like a GIC? It would make better sense to spend it on whatever you floated the note for or don't borrow the money in the first place.

B. Interest rate swaps make my eyes sore. It seems like additional complexity for little return.

C. It takes two to tango. There had to be a municipal employee or elected official on the other end or the deal doesn't go down.

 

[Lynnie]

From the article the problem was the interest rate paid on Guaranteed Investment Contracts and interest rate swaps And I am trying to figure out why anyone would think either of those is a good idea.

A. Why didn't the municipalities just put the money from the muni bond offering into a local bank until they used it? Why would anyone borrow (issue a bond) then invest the proceeds in something like a GIC? It would make better sense to spend it on whatever you floated the note for or don't borrow the money in the first place.

B. Interest rate swaps make my eyes sore. It seems like additional complexity for little return.

C. It takes two to tango. There had to be a municipal employee or elected official on the other end or the deal doesn't go down.

I think you're exactly correct about this. And, the municipalities will be able to bail themselves out.

It does make an investor in FL bonds a little reticent, however.