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In what Bloomberg calls "the broadest-ever criminal investigation of public finance:"

Wall Street’s biggest banks were cheating cities and towns.

Every year US states and cities sell bonds worth about $400 billion, then invest the funds in something called GICs to earn interest.  GICs are bought from banks or insurance companies. A years-long DOJ investigation into systemic corruption shows Wall Street's big banks were rigging GICs (Guaranteed Investment Contracts). To cheat us.

(According to the CDR indictment:) Banks and advising firms illegally siphoned money from taxpayers by paying artificially low interest rates in the GICs.... The money was intended to build schools, hospitals, roads and sewers and refinance higher-cost debt.

Could America afford these consequences?

reduced public funding for schools and housing across the U.S.

Let's get this straight. What were the big Wall Street banksters doing during the very decade in which Wall Street was roaring ahead toward the greatest economic collapse since the Great Depression? I like how Martin Z. Braun and William Selway put it:

As the banks were steering the world’s financial system to the brink of catastrophe by loading more than $1 trillion of subprime mortgage loans into opaque debt investments, they were also duping public officials across the U.S.

Banks and advice firms "siphoned money from taxpayers" routinely. For years.

Bid rigging became the way banks did business. Hey, any chance for a billion bucks.

It cost taxpayers billions.

Yes. They took hard-earned money that should have been used on building schools or roads or hospitals. And they put it in their own bank accounts. How can these people live with themselves? No doubt they thought they were entitled.

Who suffers from these crimes?

Children in run down schools with not enough teachers.

Poor people who did not get adequate housing due to the greed and corruption.

Your county couldn't afford to pave that road full of potholes? You suffered.

We all suffer from it.

This conspiracy was nationwide.

And you do not hear anything about it!

Financial advisers to cities and towns actually "colluded" with many of the Wall Street banks involved in the 2008 economic crisis in which millions lost their jobs and homes.

These banks include: Bank of America Corp. (which is cooperating with the investigation) Citigroup, JPMorgan Chase & Co., the defunct Lehman, Wachovia and 11 other banks.

Banks, yep, all those Wall Street goliaths we love to hate. Turns out they were in the business of rigging bids on GIC auctions. To cheat us.

On March 24, the Justice Department filed a list in Manhattan's US District Court (then put under seal) of "contracts for tens of billions of taxpayer money."

The lengthy Bloomberg article describes how this conspiracy, including 160 state agencies, nonprofits and local governments stretching coast to coast, worked.

An IRS field operator for the tax-exempt bond Div., Charlie Anderson, said:

The whole investment process was rigged across the board...

He said people would talk about the rigging on office phones, apparently with little fear of ever being caught.

With these GICs, your town would need to rely on investment advice from finance firms such as CDR which would gather supposedly competing offers. But CDR would lie to your town and work with the banks to get them lower interest rates so that banks could earn more money. The banks would provide CDR a kickback.

So while banks were operating their casinos, bundling a trillion subprime loans into the most dubious of investments:

they were also duping public officials across the U.S.

Criminal antitrust investigations are on-going into bid-rigging for GICs in which kickbacks ranged from a few thousand to almost a half million. Many lawsuits have been filed in various states.

Yes. Again and again and again and again. They took hard-earned money that should have been used on building schools or roads or hospitals. And they put it in their own bank accounts.

Last year the NYT ran an article on the rigging scandal.

Again and again, proceeds from tax-exempt bonds appear to have improperly generated investment income for banks and insurers.

snipThis is an investigation into the way "an entire market has operated for years."

Our old friend, Charles Anderson pops up again:

It’s rare to sell a Senate seat, but it’s not rare to sell a bond deal.
Pay-to-play in the municipal bond market is epidemic.

(Anderson) estimated that as much as $4 billion a year was vanishing into the (corrupt) system.

One antitrust attorney, Michael D. Hausfeld, calls this:

one of the longest-running, most economically pervasive antitrust conspiracies ever to be uncovered in the U.S.

I'm not the one to best write this but I had not read about it and think everyone needs to know about it especially with Congress trying to pass some financial reforms.

Originally posted to Gorette on Tue May 18, 2010 at 01:54 PM PDT.

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