Big Bank Conflict-of-Interest Deals in California Bond Market with Credit Default Swaps

It's awful! The big banks are at it again - betting against California!

It's awful! The big banks are at it again - betting against California!

It is unbelievable. The big banks are now betting on whether California will be able to keep its obligations for its Municipal Bonds.

In front of the little curtain big banks like:

  • Bank of America-Merrill Lynch
  • Barclays
  • Citigroup
  • Goldman Sachs
  • JPMorgan Chase
  • Morgan Stanley

are underwriting the California bonds. At the same exact time behind the curtain the same banks are betting against those bonds by buying credit default swaps (CDSs).

Oh, the bets and games these crazy bankers play.

The Banks are Betting Against California with Credit Default Swaps!

The Banks are Betting Against California with Credit Default Swaps!

According to Reuters article:

“When C.D.S. prices are higher, that suggests the issuer is less credit-worthy and more at risk of default. That can increase the premium investors demand to take on extra risk of owning that issuer’s debt.”

Do these banks think it is OK to underwrite California municipal bonds and play the market at the same time betting on California’s creditworthiness? I guess so.

Hedge Funds run amok!

Hedge Funds run amok!

Remember many banks just got bailed out with $356.2 billion U.S. dollars. Now they are back to betting.

Oh, that’s so much like them. They do not care how their betting against states like California, countries like Greece and sub-prime mortgages with massive amounts of money can destroy people, states, countries and the world economy. How is it that these guys give each other big fat bonuses whether they help or hurt the economy?

It is time for Congress to grow its spine again and create some boundaries for this kind of activity. It seems that some Wall Street Wizards continue to think they can do whatever they want, whenever they want, no matter who suffers because of their selfish actions.

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