Then Scott sends me a link to this story in Rolling Stone:
This sounds kind of like the story I heard last month, but it's not. This one doesn't make any sense:
The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement.Towns don't earn interest on municipal bonds, they PAY interest on the bonds they sell, so on the face of it, it sounds like the banks were conspiring to save money for taxpayers all over the country. Well that can't be the case, because the government convicted them of being crooks. What is going on here?
The problem comes up AFTER the bonds have been sold. Say a town needs ten million dollars to build a school or a road or a water treatment plant. They sell the bonds to whoever wants to buy them. They take the ten million dollars they got from the sale and put in the bank until they need it to pay the people who are actually going to do the work. The problem is how much interest they are earning on their bond money while it is sitting in the bank, waiting to be paid out. Seems there is supposed to be an auction to determine who gets the deposit. Problem was that the banksters were rigging the auction. Took me half way through page two of the story to sort that part out. Bad Rolling Stone.
P.S. I somehow doubt that this bond business is worth $3.7 trillion dollars. That might be the value of all the bonds currently held, but the interest on that is only a few percent. Still, even one percent of $3.7 trillion dollars is a heck of a lot of money, like $37 billion a year. If you can shave one tenth of a point off of that you can still collect $3.7 billion dollars a year, which will pay at least a couple of executive bonuses.