Banks Bet Against U.S. Cities, States

[abelenkpe]

Banks Bet Against U.S. Cities, States

http://www.huffingtonpost.com/2010/04/27/banks-bet-against-us-citi_n_553891.html

Amidst growing pessimism about the financial condition of U.S. cities and states, investors are increasingly buying financial instruments that essentially allow them to short sell - or bet against - cities and states, says a Wall Street Journal report.

Offered by banks like JP Morgan, Bank of America, and Citigroup, the so-called municipal credit default swaps can be used by investors to bet that insurance contracts protecting holders of municipal bonds will default.

Some states say the derivatives not only scare away potential buyers of municipal bonds by creating a perception of risk, but ultimately drive up states' borrowing costs. Others contend that the instruments are traded too thinly to affect municipal bond markets or a state's credit rating.

(more at link)

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Bah! This seems so detrimental. Is there any way to discourage this? Without putting tons of people out of work...which really wouldn't help the economy either?

[RandomThoughts]

1. It is possible, not sure if it is true, but possible.

The banks are trying to threaten financial hardship.


That is a grave discussion, but it is not a difficult one.

If you give your power to someone that threatens to hurt you, then they will still hurt you and many people, because that is their nature.

So it is best to stand against that, then give your power to someone that wants people to suffer.

People should find that which shows kindness to many people, not hurt. Or at the minimum, at least does as they would want done to them, or only that which a person considers right by there own rules.

Thats my opinion on that.

[rfranklin]

2. Derivatives do not employ many people...

They do, however , enrich a very few people who might then hire servants, commission interior designers and frequent high end restaurants.

[abelenkpe]

4. Worried

that states would be forced to undergo strict austerity measures like Greece and lay off lots of workers to reduce deficits.

But now I'm worried about those servants too! :)

[Zenlitened]

3. And yet, for the past half-year at least, we Dumb Money investors have been told...

... that yields on municipal bonds are great and now is the time to buy!!!!

Note: This "advice" generally included no discussion of WHY yields are high.

Funny, that.

Kinda reminds one of GS selling "shitty deals," no? :eyes:

[upi402]

5. Republican Deregulation = epic fail

I have nothing to add to this sad turn. I have no hope for progress until there's media reform.

bump