boutons_deux
12-28-2011, 06:34 AM
Nationwide, about 20 percent of debt issued by states and local governments is sold through competitive bids. Issuers post public notices asking banks to make proposals and award the debt to the bidder offering the lowest interest cost. The other 80 percent are done through negotiated underwriting, where municipalities select a bank to price and sell the bonds.
By "negotiated underwriting," what Bloomberg means is, "local governments just hand the bid over to the bank that tosses enough combined hard and soft money at the right politicians."
It gets even worse in the derivatives markets, where banks routinely overcharge state and local governments for things like interest rate swaps, for one very obvious reason – swaps are not traded on open exchanges, so only the banks know how to price them.
The big banks know this, which is why there should never, ever be non-competitive bids for those sorts of financial services. In a sole-source contract for a swap deal, you’re trusting a (probably corrupt) Too-Big-To-Fail bank to give you a good deal for a product whose price is not publicly listed anywhere.
There have been numerous investigations and lawsuits across the world connected with this sort of systematic overcharging, from Erie, Pennsylvania to the notorious Jefferson County, Alabama case, to Milan, Italy (which sued Chase and four other banks for misleading them about derivative prices).
And in the oft-discussed Jefferson County case alone, Chase reportedly overcharged the locals $100 million for the crooked swap deals that, in a completely separate outrage, will probably leave Birmingham bankrupt for the next generation.
http://www.rollingstone.com/politics/blogs/taibblog/how-banks-cheat-taxpayers-20111227
========
aka, confiscatory/redistribution of wealth from the taxpayers/99% to the 1%.
And yet most Americans believe the VRWC lies and propaganda that Big Govt is America's biggest threat.
By "negotiated underwriting," what Bloomberg means is, "local governments just hand the bid over to the bank that tosses enough combined hard and soft money at the right politicians."
It gets even worse in the derivatives markets, where banks routinely overcharge state and local governments for things like interest rate swaps, for one very obvious reason – swaps are not traded on open exchanges, so only the banks know how to price them.
The big banks know this, which is why there should never, ever be non-competitive bids for those sorts of financial services. In a sole-source contract for a swap deal, you’re trusting a (probably corrupt) Too-Big-To-Fail bank to give you a good deal for a product whose price is not publicly listed anywhere.
There have been numerous investigations and lawsuits across the world connected with this sort of systematic overcharging, from Erie, Pennsylvania to the notorious Jefferson County, Alabama case, to Milan, Italy (which sued Chase and four other banks for misleading them about derivative prices).
And in the oft-discussed Jefferson County case alone, Chase reportedly overcharged the locals $100 million for the crooked swap deals that, in a completely separate outrage, will probably leave Birmingham bankrupt for the next generation.
http://www.rollingstone.com/politics/blogs/taibblog/how-banks-cheat-taxpayers-20111227
========
aka, confiscatory/redistribution of wealth from the taxpayers/99% to the 1%.
And yet most Americans believe the VRWC lies and propaganda that Big Govt is America's biggest threat.