As if we have not seen enough corruption in the financial system, there is a new investigation going on into municipal bonds. Basically, municipalities (local governments) issue bonds that are bought by investors in order to pay now for certain programs (like building libraries). The bonds are then paid off overtime just like a mortgage would be. The problem seems to be that there is very little auditing done of what the Cities claim. The issue explodes when a city defaults on it's debt.
New York Times - S.E.C. Suggests Reforms Of Municipal Bond Market
The general scope is over 3.7 trillion dollars. Lots of private investors like to buy municipal bonds because they have traditionally been seen as safe; however, there is the very real likelihood that cities have not been totally honest about their fiscal security. I seem to recall that recently some city in California was called to task for not giving accurate information in regards to their bond issuance.
If it turns out that the municipal bond system is rigged, things are going to get very interesting and cities will be unable to take on large projects that require bonding. This financial stuff is supposed to be boring; but, it just keeps getting more interesting in a bad way.
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