Tuesday, July 31, 2012

More Fraud in the Municipal Bond Market



Another aspect of the municipal bond market is being examined for manipulation.

I posted recently on how the auctions for municipal bonds were rigged and how the big banks gauged the municipalities with interest rate swaps.

For an excellent detailed analysis of how the municipal bond market was rigged see Taibbi

Now The New York Times is announcing that the municipal market data index (MMD) is being examined for manipulation. 

I honestly cannot tell if this index is discussed by Taibbi in his account of bid rigging in the municipal market or if this is yet another type of manipulation.

Taibbi looked at how the banks were essentially divvying up the municipal bonds in fake auctions. 

The MMD discussed in The New York Times article may be the index that was used to justify the interest rates the banks payed in the rigged auctions. I cannot tell from this article or from the Taibbi one:
 
Muni Rates Examined for Signs of Rigging  By NATHANIEL POPPER
Published: July 30, 2012
http://www.nytimes.com/2012/07/31/business/muni-rates-examined-for-signs-of-rigging.html?_r=1&nl=todaysheadlines&adxnnl=1&emc=edit_th_20120731&adxnnlx=1343752720-YSj+cdaeM3DKcqqYx4jLTg

[Excerpt] The scrutiny of the M.M.D. rates comes as a number of other events are drawing attention to the transparency and fairness of the municipal bond market. On Monday, three former bankers at UBS went on trial in Manhattan on charges that they had colluded to steer municipal bond transactions to specific banks in exchange for kickbacks

Thomson Reuters, which owns Municipal Market Data, said on Monday that it “has been involved in discussions with regulators” about the rates, which influence the prices of bonds and derivatives in the $3 trillion municipal bond market.

The company released the statement after the municipal bond industry’s self-regulator, the Municipal Securities Rulemaking Board, said that its board was “concerned about the transparency” behind the creation of a few indexes used to set prices in the municipal bond market, the most important of which is the M.M.D. index.

The M.M.D. rates influence a much smaller market than Libor, but it is one that is crucial to how cities and states across America borrow money to maintain roads and bridges and provide essential services such as public education.

The rates are compiled and issued each afternoon by Thomson Reuters using a proprietary method that includes input from banks that buy and sell municipal bonds, industry participants said, though Thomson Reuters does not publicly explain its method…

Majia here: The corruption is never ending. The entire financial system is built on and operates through corruption. The entire system needs to be REPLACED.
For background on Libor see my post here:

http://majiasblog.blogspot.com/2012/07/libor-scandal.html

2 comments:

  1. Very interesting, I coincidentally did a post on Muni bonds that I think sheds even more light on the subject.

    ReplyDelete
  2. http://oahutrading.blogspot.com/2012/07/debunking-muni-bond.html

    ReplyDelete