what happens? Can you say MUNI bond and Auction Rate. Well its back. Fraud on a massive scale perpetrated right in front of our eyes as if we were all too stupid to see it and most definitely not capable of stopping it and punishing the fraudsters.
In this case, a company files bankruptcy and the press conspires by avoiding to promote its formal insolvency. Obviously the press must have a reason that it would like everyone to believe that it was and has not been news worthy or relevant. Great, we can continue life as usual while everyone in the "know" does just the opposite and dumps risk. Well, wouldn't you know it, the companies that were cental to the headlines in 2007, 2008 and 2009 are insolvent and their Munibond insurance is no good - as it if ever were. While AMBAC was busy preparing its bankruptcy filing last year, Goldman Sachs was setting up its new "Ultrasafe Munibond Marketing Entity" with Incapital and JPM was trying to off risk to mom's and pops through Schwab and UBS. Lots names familiar to people who got hosed by Auction Rate securities...how come the same players are still in the same game after they blew everyone up?
Two months ago I met a guy in South Point Park in Miami Beach. He was an older guy trying to preserve money for his grand kids education - as he said. He asked me about Muni's, to which I replied that I felt
"the Muni markets are rife with bad documentation, risk and fraud and at high risk for (structural) defaults. Not a great market in which to operate, especially if Goldman and JPM are pumping like mad" The funny thing was that he then asked me about this one particular munibond that I, ironically, had looked at for Hartford, Pennsylvania. Yes, you know the city that missed its bond payments and that the state had to lend 55 million to so that they could pay the interest on the notes. He was pumped this security by his broker who said it paid nearly 8%
(of which he was very proud) and was fully insured. Clearly the broker gets paid a lot to sell crap and is therefore, highly incentivized to rip this guy off...He was rather shocked to find out that the reason Hartford was paying such exorbitant rates is because they are broke and can't actually make the payments. The issue of insurance seemed to bring him some comfort, as his advisor had clearly spent quite some time on that subject. But the insurance is worthless. What I saw in action was an example of the JPM and GoldmanTax's effort to further rip-off the public and transfer the wealth into their bonus packages.
SEPTEMBER 8, 2010:
Goldman Sachs Group Inc. is about to start selling municipal bonds directly to mom and pop.The New York company plans to enter a partnership this week with Chicago securities firm Incapital LLC to sell bonds issued by U.S. states, cities and towns to individual investors, according to a person familiar with the situation.
The arrangement will make billions of dollars of municipal bonds underwritten by Goldman available for sale by at least 85,000 brokers in Incapital's distribution network of broker-dealer firms.
The move allows Goldman to branch out into a lucrative area of the fixed-income markets, a haven for retail investors scared off by volatility in the stock market and riskier corporate credit markets. While some municipalities are facing budget crises, it is rare for municipal bonds to default. Such securities yield more than certificates of deposit or other ultra-safe investments and are tax-free in most cases, making them a staple in retiree savings accounts. read moreGoldman strikes deal to sell new-issue munis
October 1, 2010
Goldman Sachs Taps Retail With Munis
By Patrick McGee
The company recently announced that it is teaming up with the Chicago securities distributor Incapital LLC in an exclusive agreement to sell new-issue munis. Incapital maintains a retail distribution network of more than 600 broker-dealers and 400 fee-based advisors.
"We're really acting as Goldman's syndicate desk to the retail-dealer community during the traditional retail offer period," John Radtke, the president of Incapital, says. "It gives Goldman access to a customer base that they historically have never reached."
Goldman has been the lead underwriter on $16.3 billion of munis this calendar year, according to Thomson Reuters. It is best known in the municipal bond world for its institutional distribution, particularly for large issues-the 95 deals it has senior managed this year is the smallest number of deals among the top-10 firms.
Historically, virtually none of Goldman's underwriting has been distributed to the conventional retail base, aside from high-net-worth individuals who can purchase new municipal products through its private wealth division.
"We're helping to create something that's almost unprecedented in the municipal business," Radtke says. "And that's giving retail access to investments that they would never actually see."
Jeff Scruggs, co-head of Goldman's public-sector and infrastructure group, described the agreement as an expansion of a multiyear relationship with Incapital.
The firms have worked together for the past three years marketing Goldman's certificates of deposit, plain-vanilla corporate debt and some structured fixed-income products. The addition of municipal products deepens their ties while also offering municipal issuers the chance to market bonds to a wider investment base. "We felt that with the addition of the Incapital relationship, it really rounds out our overall marketing and distribution ability," Scruggs says.
Retail demand for tax-exempt products has been growing, as investors become more concerned with wealth preservation and protecting their portfolios from a potential increase in income tax rates. Federal Reserve data indicates that household holdings of muni debt increased to about 36% of the market in the first quarter of this year from less than 33% in the first quarter of 2008.
During that period, total outstanding muni debt grew 4.6%, to $2.83 trillion, from $2.71 trillion while household holdings surged 8.9% from $937.7 billion, to $1.020 trillion.
Earlier this summer, fixed-income analysts at JPMorgan Chase & Co. called the increase in retail demand a shift in the tectonic plates of the market that hasn't been seen since tax laws were changed in 1986.
The Goldman-Incapital agreement was six months in the making, according to Radtke, who expects it to be fully implemented this month. Incapital will distribute the new-issue bonds initially to a selected group of 175 broker-dealer firms that represent about 85,000 brokers, with assets totaling more than $4 trillion, Radtke says. However, he declined to name which firms were selected.
Incapital, founded in 2001, isn't very well known in muni land. But in the broader fixed-income world it offers underwriting and distribution for corporate debt, U.S. agency bonds, CDs, structured notes and mortgage-backed securities.
"The last item or table-leg was municipals," Radtke says of Incapital's expansion into fixed income. He notes that more than half of its broker-dealer clients are involved with municipal products.
"The muni world might not know Incapital, but munis aren't new to us, based on the personnel we have employed," Radtke says. He adds that the growing trading team alone has more than 50 years of experience.
Incapital hopes the agreement could raise its profile in the muni world, as it may begin looking to make a splash as a co-underwriter at some point in the future, Radtke says. This distribution deal doesn't preclude that, he says.
JPMorgan Chase, another top muni underwriter known for its institutional distribution, also beefed up its retail base recently by tapping into the retail network of Charles Schwab Corp. and extending a 2008 agreement with UBS Wealth Management for an additional two years to 2013. Citigroup accesses retail clients through its own network of nearly 20,000 brokers.
Conversely, the broker-dealer Fidelity Investments benefited from the market dislocation of recent years and ramped up its negotiated underwriting of municipal bonds.
The Goldman-Incapital agreement focuses on traditional tax-exempt products rated investment grade. Build America Bonds, with their long maturities and taxable status, have been more popular among institutional buyers rather than retail buyers. But, if market dynamics shift and individual investors become more interested in BABs, this new venture could "absolutely" be a critical avenue in that space as well, Scruggs notes.
Goldman has led 18 BAB deals this year totaling $7.3 billion, ranking it the third-largest underwriter for the stimulus bonds.
My question is:
- Where are the indictments?
- Who is paying the press to supress information that is negative.
- Where are the regulators?
- Didn't AMBAC's CEO vouch to congress that their insurances were all in great shape?
- Where are the rating agencies? and why are they downgrading the markets after the bankruptcy and not before?
I have the answer for you...
When AMBAC was busy getting its bankruptcy filing prepared.
Wisconsin's Office of the Commissioner of Insurance, or OCI took over AMBAC contracts and obligations without making much more than a peep...in the name of
preventing a MUNI bond collapse and frozen issuance market...by doing this it was hoping to
help the incompetent by deceiving the market into complacency once again while bringing no new structural stability to the picture in any way. The hope was, lets just get the AMBAC name stabilised or out of the picture and keep the game on the normally scheduled programming.
Yes, the charade...was endorsed by the OCI and this is an example of regulated fraud. The fraud is all still there, its still occurring every day and these guys attempted to make sure that this was the outcome. That was their specific goal...
let a totally flawed, deceptive, highly inducement oriented product continue to function with NO impediments.
Ironically, we should all already know that by its nature, a market in which someone tries to get your money by locking it up, providing crappy collateral and fuzzy or deceptive documentation, would require them to make some sort of inducements and incentives.
"Ok, lets make the gains tax-free in order to find marks to whom to pawn it." Sounds logical to me.
At the very same time as this ponzi scheme is being implemented, the regulator(s) had NO problem with all the
major Dealers scaling up their marketing and hype surrounding these products specifically focused on "Mom" and "Pop". Yes, there is no issue there...just lets get this boat back on the water keep it looking like its floating and get people on it...
OCI and the regulators in general did a GREAT job regulating yet another legalized fraud and theft.
