May 14 (Bloomberg) -- U.S. regulators are exploring possible conflicts of interest for banks that sold municipal bonds and bet the securities would fail, the Wall Street Journal reported, citing unidentified people familiar with the matter.
The U.S. Securities and Exchange Commission and state authorities opened a preliminary probe into municipal credit- default swap trades by banks, the newspaper said. The inquiry seeks to determine whether banks used their own capital to bet against bonds they sold and if the practice was disclosed properly to buyers, the newspaper said.
The move comes as the SEC widens its investigation, started at least a year ago, into whether banks including Goldman Sachs Group Inc. and Morgan Stanley misled investors when selling mortgage-linked securities in the lead-up to the collapse of the subprime mortgage market and global credit crisis.
The agency has been looking for abuse “across the spectrum,” enforcement chief Robert Khuzami said April 16, when the SEC accused Goldman of fraud in the sale of collateralized debt obligations. Goldman says it did nothing wrong.
It is distinctly possible that these banks, being so large and broken into more then one division had one group marketing the bonds and debt, and another group trying to profit off their collapse without any criminal collusion. Think about it, if you are working for Goldman you are pushing a product, indifferent to the actions of someone else just looking for quick strike profits. Of course its also possible that municipalities were given deals that were supposed to be good, but then went sour. This in turn would lead to bank employees telling their friends where profit might be found. Finally, its possible groups were given sour deals with the intent of grifting them out of their money on both ends, in the establishment and later collapse of these deals. I would imagine that is what the SEC needs to prove.
0 comments:
Post a Comment