Muni bonds scandal. Same scale as the LIBOR scandal?

I don’t see another thread on this and it definitely seems to be worth discussing. It seems to be getting even less press than the LIBOR thing.

What the hell can you trust anymore?

That sounds fishy. It’s true that if the interest rates are artificially low, investors in those bonds get ripped off. However, who benefits? Municipal governments, who pay lower interest to borrow. If you follow the money, that means the government is likely the culprit.

No. You’re misunderstanding what happened. It’s a long article, I know.

A municipal government has a bond issue for some large infrastructure project; let’s say a bridge. They sell all of the bonds and have the money they need. The project will take a couple of years to complete so they won’t be spending the money all at once.

So what do they do with the money that’s sitting there waiting to be spent? They take bids from various banks and deposit it in the one offering the best rate so that it’s earning interest while waiting to be spent. That way they get back some of the interest they’re paying to the bond investors.

This is what the banks were rigging. They would work together to keep down the rates they paid to the municipalities for these funds.

And by “work together” he means bribe the people running the auction to tell them what to bid. Which was recorded on wiretaps.

There were also a number of political payoffs outed in courts as well - I believe Bill Richardson was implicated somehow.

Oh, okay, so not muni bonds as investors understand them. I wasn’t aware that municipalities did that.