Thursday, Feb 21, 2008
A bit technical but worth a read. The gist of it points to a hammer-blow in the credit markets.
Bloomberg: Auction-Rate Debt Succumbs to Bid-Rig Taint as Citigroup Flees
The collapse of the auction-rate bond market, where state and local governments go to raise cash, demonstrates that regulators are no match for Wall Street.
Hundreds of auctions have failed this month, sending borrowing costs as high as 20 percent because dealers from Goldman Sachs Group Inc. to Citigroup Inc., UBS AG and Merrill Lynch & Co. stopped using their own capital to support the sales. Regulators, who allowed the manipulation of bids and lack of information to persist even after two probes in the past 15 years, are now watching a $342 billion market evaporate at the expense of taxpayers.
Posted by tyrellcorporation @ 01:59 PM (204 views) Add Comment
3 Comments
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1. happyrenterz said...
Thanks great post.
``There's never been anything like this,'' said Kevin Shanley, chief financial officer of Summit, New Jersey-based AHS Hospital Corp., which owns two hospitals in northern New Jersey. AHS saw the rate it pays on $60 million of securities rise to 12 percent from 3 percent at auctions last week. ``I won't pay 12 percent for more than one minute without refinancing.''
The rate on $100 million of auction debt sold by Wisconsin to its pension plan jumped to a record 11.5 percent on Feb. 14. Now, the state is considering options that include converting the bonds to other types of debt.
``My pulse is racing,'' said Frank Hoadley, director of capital finance for Wisconsin. The rate ``is obviously very expensive and unacceptable,'' he said. "
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