Bloomberg reports that banks have apparently been rigging the municipal bonds market.
They rigged bids on auctions for so-called guaranteed investment contracts, known as GICs, according to a Justice Department list that was filed in U.S. District Court in Manhattan on March 24 and then put under seal. Those contracts hold tens of billions of taxpayer money.
...
In October, CDR was charged with criminal conspiracy and fraud, along with Chief Executive Officer David Rubin, 48, vice president Evan Zarefsky and Wolmark. They pleaded not guilty. Rubin, who was also charged with making fraudulent bank transactions, faces as much as $3 million in fines and more than 30 years in jail if convicted.Rubin declined to comment in a telephone call.
“Mr. Rubin doesn’t think that CDR broke the law in any of these transactions,” said Laura Hoguet, his attorney in New York.
Daniel Zelenko, a lawyer for Zarefsky in New York, said he was confident his client will prevail at trial.“The government continues to show that it simply doesn’t understand how this market operated,” Zelenko said in an e- mail.
Self-interest, unfettered by ethics, virtue or sunlight, is a wondrous thing indeed. A marvelous source of fraud
innovation. I wonder how we can blame this on Fannie, Freddie, or the government?
I can't wait to see how the viaticals market plays out...."well, yes, we were killing people before their time, but you just don't understand how this market works...." (Hat tip to rjs.)
the thought that came to mind when reading that bloomberg article is that we're going to have get back to community banking, or find a way where bankers and financial advisers are responsible to the community they live in...having great vampire squids in new york relentlessly sucking the nation dry of everything that smells of money is no way to run a country...
Posted by: rjs | 05/19/2010 at 08:18 AM
Derivative Disaster Spreads to Local Governments - -- The derivative disaster that devastated Wall Street now stalks state and local governments, threatening pain for teachers, other public employees and those counting on public pensions, according to a range of financial experts and plaintiffs’ attorneys. Over the last decade, their argument goes, state and local officials who lacked expertise in the multi-layered “synthetic” financial instruments so dear to New York’s mega-banks have been seduced into them anyway. The result is that states, cities and counties ended up owning collateralized debt obligations and credit default swaps like those that blew up in the faces of major corporations like AIG during the 2008-2009 financial meltdown. Increasing reports of these deals turning sour, beginning with the 2007 downturn in housing, makes woeful state and local budget outlooks even bleaker, increasing the likelihood of laid off workers and service cut backs ranging from public transportation to sanitation.
anecdotes in article:
http://www.capitolnewsconnection.org/?q=node/14689
Posted by: rjs | 05/19/2010 at 03:48 PM
To me, the “viaticals” concept doesn’t pass the sniff test.
If paying $X to Mr. Y now in return for paying his life insurance premiums for the rest of his life and collecting the value of the policy when he dies were a good deal, why wouldn’t his insurance company offer him the same deal themselves? I’m sure their actuarial department is better than mine.
Posted by: Coises | 05/19/2010 at 06:12 PM