Bond brokers could not sell the auction-rate bonds that they advised States, Counties, Cities, Hospitals, Schools and other bond-issuing local governments to issue and now taxpayers are paying credit banks on Wall Street penalties because the local governments are getting out of the auction-rate bond market and in at least one case canceling "an interest-rate swap agreement," it is reported by Michael McDonald, "Citigroup Leads Wall Street Drive to Hurt Taxpayers (Update 2)" (Bloomberg.com, Friday, May 9, 2008).
It is also reported that bond brokers are receiving new fees to sell bonds that need to be issued to replace the revenue lost with the failed auction-rate bonds.
Swaps smell suspiciously like unregulated Insurance. Whatever they truly are, for local governments entering into them, swaps failed.
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